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Annual Report

31 December 2014

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CORPORATE DIRECTORY

BOARD OF DIRECTORS

as at 31 December 2014:

Richard Newsted

Non-executive Chairman

(appointed 25 June 2014)

Maryse Belanger

Chief Executive Officer and Managing

Director


Ross Griffiths

Non-executive Director


Mark Milazzo



Aliastair McKeever


(appointed 6 August 2014)

COMPANY SECRETARY

Dr. Linda Tompkins


REGISTERED OFFICE

Level 21, Allendale Square

77 St Georges Terrace

Perth WA 6000

PO Box Z5184

St Georges Terrace

Perth WA 6831

Telephone: +61 8 9324 1177

Fax: +61 8 9324 2171

Email: [email protected]

Website: www.mirabela.com.au

BRAZIL OFFICE

Mirabela Mineração do Brasil Ltda

Rua Antônio de Albuquerque, 166,

13º andar, Funcionários

30112-010 Belo Horizonte, MG - Brasil

Telephone: +55 31 3307 0902

Fax: +55 31 3307 0901

SHARE REGISTRY (AUSTRALIA)

Advanced Share Registry

150 Stirling Highway

Nedlands WA 6009

PO Box 1156

Nedlands WA 6909

Telephone: +61 8 9389 8033

Fax: +61 8 9389 7871

Email: [email protected]

Website: www.advancedshare.com.au

COMPANY AUDITORS

KPMG

235 St Georges Terrace

Perth WA 6000 Australia

Telephone: +61 8 9263 7171

Fax: +61 8 9263 7129

Website: www.kpmg.com.au

STOCK EXCHANGE LISTING

Australian Securities Exchange

(ASX code: MBN)

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MIRABELA NICKEL LIMITED

3

CONTENTS

DIRECTORS’ REPORT ..................................................................................................................... 4

DIRECTORS’ DECLARATION .......................................................................................................... 43

INDEPENDENT AUDITOR’S REPORT .............................................................................................. 44

LEAD AUDITOR’S INDEPENDENCE DECLARATION.......................................................................... 46

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME ............ 47

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY .................................................................. 48

CONSOLIDATED STATEMENT OF FINANCIAL POSITION ................................................................. 50

CONSOLIDATED STATEMENT OF CASH FLOWS ............................................................................. 51

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ............................................................. 52

CORPORATE GOVERNANCE ....................................................................................................... 103

SHAREHOLDER INFORMATION .................................................................................................. 115

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DIRECTORS’ REPORT

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The directors of Mirabela Nickel Limited (the Company) present their report together with the financial report

of the Company and of the Group, being the Company and its subsidiaries, for the financial year ended 31

December 2014 and the auditor’s report thereon. The use of the words Company and Group are

interchangeable for the purposes of this report and the financial report.

1 DIRECTORS AND COMPANY SECRETARY

The directors and the company secretary of the Company at any time during or since the end of the financial

year were as follows:

1.1 Directors

Information on Directors Mr Richard Newsted Non-executive Director (appointed 25 June 2014)

Qualifications BSc (Accounting), M Bus Admin (Hons) Experience Mr Newsted is a senior executive with over 30 years’ experience in senior executive

roles within the US automotive and steel industry. Mr Newsted spent over eight

years, including four years as President and Chief Executive Officer, with Meridian

Automotive Systems Inc., a global tier-one automotive supplier of front and rear-end

modules, exterior and interior thermoplastics, composites and lighting systems.

Prior to joining Meridian, Mr Newsted served seven years as Executive Vice President

in various finance, manufacturing and commercial capacities at AK Steel Holding

Corporation and has also worked for fifteen years in various roles in the finance

department, culminating in being named Chief Financial Officer, at National Steel

Corporation, both integrated steel producers. Mr Newsted is a Certified Public

Accountant, Certified Management Accountant and Certified Cash Manager. Special responsibilities Chairman of Board, Chairman of Nomination and Remuneration Committee and

member of Audit Committee Directorships held in other listed entities during the last three years

Dayco LLC (Non-executive Chairman – November 2009 to present) Rotech Healthcare Inc. (Non-executive Chairman – September 2013 to present) United States Steel Canada Inc. (Non-executive Director – January 2014 to present) GT AdvancedTechnologies Inc. (Non-executive Director – November 2014 to present)

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Ms Maryse Belanger Executive Director (appointed 27 June 2014)

Qualifications BSc (Geology), P.Geo Experience Ms Belanger is a geologist with over 25 years’ experience in the mining industry

including long-term assignments in Africa and South America. Prior to joining

Mirabela, Ms Belanger was Senior Vice President, Technical Services at Goldcorp

where she oversaw all aspects of geology, geostatistics, mine planning and design,

metallurgy, tailings, hydrology, rock mechanics, geotechnical engineering and

underground development and was responsible for the activities and strategy

related to technical excellence, energy and innovation. Before joining Goldcorp, Ms

Belanger was Director, Technical Services for Kinross Gold Corporation in Brazil for

four years. She is fluent in English, French, Spanish and Portuguese. Ms Belanger

holds a Bachelor degree in Geology and a graduate certificate in Geostatistics. She is

a board member of CEEC International Ltd and Mineral Deposit Research Unit at the

University of British Columbia (UBC) and an active member of Westcoast Women in

Engineering, Science and Technology (WWEST). Special responsibilities Chief Executive Officer and Managing Director Directorships held in other listed entities during the last three years

N/A

Mr Ross Griffiths Non-executive Director (appointed 25 June 2014)

Qualifications Dip Bus Studies (Acc), FCA, MBA, GAICD Experience Mr Griffiths is a Chartered Accountant with over 40 years’ experience in risk and

finance both in Australia and overseas. Last year he retired from a senior executive

role with a major Australian bank where he worked for 28 years specialising in credit

risk including corporate turnaround and debt restructure. In this role he had

exposure to a wide range of industries including in the mining sector. Prior to this

role, Mr Griffiths worked for an international accounting firm in Australia and

overseas. Previous directorships have included companies in the infrastructure,

mining and property sectors. He is presently a director of Newcastle Permanent

Building Society Limited which is one of the largest mutual banking institutions in

Australia. Mr Griffiths is a Fellow of the Institute of Chartered Accountants in

Australia and a graduate member of the Australian Institute of Company Directors. Special responsibilities Chairman of Audit and Risk Committee and member of Nomination and

Remuneration Committee Directorships held in other listed entities during the last three years

CFS Retail Property Trust (name changed to Novion Property Group) - resigned March 2014. Commonwealth Office Property Fund - resigned March 2014.

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Mr Mark Milazzo Non-executive Director (appointed 25 June 2014)

Qualifications B.Eng. Mining, FAusIMM Experience Mr Milazzo is a Mining Engineer with over 30 years’ experience in the development

and management of mines and mineral processing plants across a range of

commodities in Australia and overseas. This includes both underground and surface

operations, and covers a wide range of mining applications, from small scale

selective to mechanised bulk extraction methods. He has been involved in a number

of new mine development and mine expansion projects. Past senior roles include

General Manager of the Olympic Dam Mine and Kambalda Nickel Operations with

WMC Resources, and General Manager with mining contractor HWE Mining. Mr

Milazzo is a Fellow of the Australasian Institute of Mining and Metallurgy. Special responsibilities Member of Audit and Risk plus Nomination and Remuneration Committees Directorships held in other listed entities during the last three years

Aurelia Metals Limited (previously YTC Resources Ltd) (Non-executive Director – August 2012 to present). Red 5 Limited (Non-executive Director – May 2011 to present). Cortona Resources Limited (Non-executive Director – resigned January 2013.

Mr Alastair McKeever Non-executive Director (appointed 6 August 2014)

Qualifications BA Experience Mr McKeever is a research team leader in Guggenheim Partners Investment

Management’s Corporate Credit Group, which he joined in 2007. Mr McKeever leads

the research team that is responsible for sourcing, analysing, executing and

managing investments across the capital structure in the metals & mining, energy,

industrials, building products and education industries. Mr McKeever received a B.A.

in Economics and Classics from the University of North Carolina at Chapel Hill, where

he was a Morehead-Cain scholar. Special responsibilities Member of Nomination and Remuneration Committee Directorships held in other listed entities during the last three years

N/A

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Mr Geoffrey Handley Non-executive Director (appointed 1 January 2011; resigned effective 11 January 2014) Non-executive Chairman (appointed 1 January 2012; resigned effective 11 January 2014)

Qualifications Acc.Dir BSc (Hons, Geology and Chemistry), MAusIMM, MAICD Experience Mr Handley is a Geologist with more than 32 years of experience in the mining

industry. Mr Handley worked as a geologist for BHP Exploration Limited, as a chemist

and geologist for Placer Exploration Limited, and as an analyst for the AMP Society. In

1981, he joined Placer Pacific Limited as a senior geologist and was responsible for the

exploration and feasibility work at the Porgera, Granny Smith, Osborne and Big Bell

mines. Subsequently, Mr Handley was Executive Vice President, Strategic

Development with Placer Dome where he was responsible for global exploration,

acquisitions, research and development, and strategic planning. Special responsibilities Chairman of the Board and Remuneration & Nomination Committee Directorships held in other listed entities during the last three years

Eldorado Gold Corporation (Non-executive Director – from August 2006) Endeavour Silver Corp. (Non-executive Director – from June 2006) PanAust Limited (Non-executive Director – from September 2006)

Mr Ian Purdy Executive Director (appointed 2 November 2009; resigned as director effective 5 May

2014; resigned as Chief Executive Officer effective 31 May 2014)

Qualifications B.Com, FCA, FAICD Experience Mr Purdy has held a number of senior positions in the Australian mining industry,

including Managing Director of Norilsk Nickel Australia and Director of Finance and

Strategy of LionOre Australia, where he led the management of sulphide and laterite

nickel operations. He has a strong track record in operations management, sales and

logistics, and financial control. Mr Purdy previously worked for WMC Limited and

North Limited in senior financial and commercial roles. Special responsibilities Chief Executive Officer & Managing Director Directorships held in other listed entities during the last three years

N/A

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Mr Ian McCubbing Non-executive Director (appointed 1 January 2011; resigned effective 7 April 2014)

Non-executive Chairman (appointed 11 January 2014; resigned effective 7 April 2014)

Qualifications B.Com (Hons), MBA (Ex), CA, GAICD Experience Mr McCubbing is a Chartered Accountant with more than 26 years corporate

experience, principally in the areas of accounting, corporate finance and mergers and

acquisitions. He has spent more than 15 years working with ASX-200 and other listed

companies in senior finance roles, including positions as Finance Director and Chief

Financial Officer in mining and industrial companies. Special responsibilities Chairman of Audit Committee and Member of Remuneration & Nomination

Committee to 11 January 2014 Chairman of the Board effective 11 January 2014

Directorships held in other listed entities during the last three years

Alcyone Resources Limited (Non-executive Director – from February 2012) Eureka Energy Limited (Non-executive Director – from July 2010) Kasbah Resources Limited (Non-executive Director – from March 2011) Minemakers Limited (Non-executive Director – from December 2012) Swick Mining Services Ltd. (Non-executive Director – from August 2010) Territory Resources Ltd. (Non-executive Director – May 2007 to July 2011)

Mr Peter Nicholson Non-executive Director (appointed 12 June 2012; resigned effective 11 January 2014)

Qualifications B.Eng (Mining), F.Fin, GAICD, MAusIMM Experience Mr Nicholson has a strong commercial and technical background, developed over the

last ten years with Resource Capital Funds (RCF), and prior to that, in senior technical

roles within the nickel mining industry. He is an employee of RCF, a mining focused

private equity fund which acquired a substantial holding in Mirabela Nickel Limited

through Resource Capital Fund V L.P. Special responsibilities Member of Remuneration & Nomination Committee Directorships held in other listed entities during the last three years

Cape Alumina Limited (Non-executive Director – from March 2007) Metallica Minerals Limited (Non-executive Director – May 2006 to November 2010)

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Mr Colin Steyn Non-executive Director (appointed 29 October 2009; resigned effective 11 January

2014)

Qualifications B.Com, MBA Experience Mr Steyn has over 32 years’ experience in the resources sector with particular

expertise in the development of integrated nickel mining operations. Mr Steyn was

previously President and Chief Executive Officer of LionOre Mining

International from 1999 to 2007, when it was acquired by Norilsk Nickel. He was one

of the original founders of LionOre and was instrumental in the growth and

development of LionOre into a major international nickel producer. From 1996 to

2000, Mr Steyn was a director of Centachrome, a worldwide metals marketing

organisation. For five years prior to 1996, Mr Steyn was Executive Director in charge

of Metallurgical Operations in Zimbabwe for Rio Tinto, where he started his career in

1979. Special responsibilities Member of Audit Committee Directorships held in other listed entities during the last three years

Coalspur Mines Limited (Chairman of the Board – from October 2010) Asanko Gold Incorporated (Non-executive Director – from October 2012) Mantra Resources Ltd. (Non-executive Director – March 2008 to June 2011)

Mr Nicholas Sheard Non-executive Director (appointed 20 March 2007; resigned effective 7 April 2014)

Qualifications ASEG, Fellow AIG, RP.Geo Experience Mr Sheard has a long history of involvement in nickel sulphide exploration and

development. Up until 2007 Mr Sheard was the Vice President of Exploration of Inco,

based in Toronto. Mr Sheard managed an exploration team of 250 people with nine

offices and 11 mines worldwide. Under Mr Sheard's leadership, the Inco team

discovered the Reid Brook nickel sulphide deposit in Labrador, Canada. Prior to joining

Inco, Mr Sheard held various senior management positions with MIM Exploration Pty

Ltd in Australia from 1990 to 2003; including General Manager of Worldwide

Exploration and Chief Geophysicist. Special responsibilities Member of Audit Committee to 11 January 2014

Chairman of Audit Committee and Remuneration & Nomination Committee effective 11 January 2014


Carpentaria Exploration Limited (Executive Chairman – from November 2007)

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1.2 Company Secretary

Dr Linda Tompkins Company Secretary (appointed 25 June 2014)

Qualifications BSc (Hons), MSc, Phd (Geology), LLB (hons), GAICD, MAusIMM Experience Dr Tompkins is a corporate mining and resource lawyer with considerable

management and executive experience in the mining and resource sector,

comprising more than 20 years as a geologist, including seven years multi-

commodity minerals exploration in Brazil. Prior to joining Mirabela, Dr Tompkins

practiced as Senior Associate resources with Allion Legal after practicing as a lawyer

in the corporate energy and resources team of a large international law firm. Her

focus is on international exploration and mining development projects, procurement,

corporate governance, risk management, company secretarial support and

corporate, commercial and finance transactions. Dr Tompkins is an executive

member of the WA state branch AMPLA Resources and Energy Law Association,

graduate Australian Institute of Company Directors, and a member of the Australian

Corporate Lawyers Association, the Australasian Institute Mining and Metallurgy and

the Geological Society of Australia. Special responsibilities Legal Counsel and Company Secretary


N/A

Mr Christiaan Els Company Secretary (appointed 7 January 2010; resigned as Company Secretary

effective 19 May 2014)

Qualifications B.Com (Hons), CA Experience Mr Els is a finance executive with over 22 years’ experience in mining,

manufacturing, agribusiness, business services and fast moving consumer goods

sectors in Australia and in South Africa. Previously, he was Chief Financial Officer of

Norilsk Nickel Australia, where he managed finance, accounting and IT services.

Most importantly, Mr Els brings a wealth of operating experience in nickel sulphide

projects and in the reporting requirements for the Toronto and Australian stock

exchanges.

Mr Els is also an associate member of the Chartered Institute of Management

Accountants and a member of the Certified Practising Accountants of Australia and

the Chartered Global Management Accountants. Special responsibilities Chief Financial Officer & Company Secretary


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1.3 Directors’ Meetings

The number of directors’ meetings and number of meetings attended by each of the directors of the Company

during the financial year were:

Current Directors Board of Directors Audit and Risk Committee Remuneration Committee

Present Held(6) Present Held Present Held

Richard Newsted(1)

16 16 1 1 - -

Maryse Belanger(2)

15 15 - - - -

Ross Griffiths(3) 16 16 1 1 - -

Mark Milazzo(4)

14 16 1 1 - -

Alastair McKeever(5)

14 14 - - - - (1) Mr Richard Newsted was appointed Non-executive Chairman effective 25 June 2014 and Chairman of the Nomination and Remuneration Committee and

joined the Audit and Risk Committee effective 26 June 2014. (2) Ms Maryse Belanger was appointed Chief Executive Officer of the Group effective 27 June 2014. (3) Mr Ross Griffiths was appointed Non-executive Director effective 25 June 2014 and Chairman of Audit and Risk Committee and joined the Nomination

and Remuneration Committee effective 26 June 2014. (4) Mr Mark Milazzo was appointed Non-executive Director effective 25 June 2014 and joined the Audit and Risk Committee and the Nomination and

Remuneration Committee effective 26 June 2014. (5) Mr Alastair McKeever was appointed Non-executive Director and joined the Nomination and Remuneration Committee effective 6 August 2014. (6) Represents the number of meetings held since being appointed as a director to the current Board.

Previous Directors Board of Directors Audit Committee Remuneration Committee

Present Held(7) Present Held Present Held

Geoffrey Handley(1)

1 1 - - - -

Ian Purdy(2)

7 7 - - - -

Ian McCubbing(3) 7 7 - - - -

Peter Nicholson(4)

1 1 - - - -

Nicholas Sheard(5)

7 7 - - - -

Colin Steyn(6) 1 1 - - - - (1) Mr Handley resigned from the Board effective 11 January 2014. (2) Mr Purdy resigned from the Board effective 5 May 2014, and resigned as Chief Executive Officer of the Group effective 31 May 2014. (3) Mr McCubbing resigned from the Board effective 7 April 2014. (4) Mr Nicholson resigned from the Board effective 11 January 2014. (5) Mr Sheard resigned from the Board effective 7 April 2014.

(6) Mr Steyn resigned from the Board effective 11 January 2014. (7) Represents the number of meetings held prior to resignation from the previous Board.

1.4 Corporate Governance

The directors of Mirabela Nickel Limited support and have adhered to the principles of sound corporate

governance. The Corporate Governance Statement can be found from page 103 of this report.

2 OPERATING AND FINANCIAL REVIEW

2.1 Operating Review

The Group is a single asset, Brazilian nickel producer engaged in the mining, production and sale of nickel

concentrate and as a result is heavily geared to the nickel price and the Brazilian real / US dollar exchange rate.

The continued low nickel prices still pose challenges in terms of operational cashflow.

During the fourth quarter of 2014 the Group saw strong improvement in ore grade, mill throughput and

process recovery. The improved operational performance is the result of changes to the cut-off grade

strategy, better sequencing of ore and waste fronts, mining of higher grades and implementing new process

control procedures in the mill.

The Board approved the Company’s new Mine and Business Plan for 2015 (the Mine Plan), as referred to in

Note 2 of the consolidated financial statements, on 10 February 2015. The Mine Plan focuses on streamlining

operations and reducing production unit costs. The Mine Plan targets optimising near-term cashflows given

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DIRECTORS’ REPORT

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the low and volatile nickel price environment. Production levels to-date have improved in line with the Mine

Plan.

2.1.1 Safety

The Group’s twelve month moving average Lost Time Injury Frequency Rate (LTIFR) closed the year at 1.58 (31

December 2013: 0.57). The unfavourable movement in the LTIFR for the year resulted from a number of

minor injuries and sprains occurring in the second and fourth quarters of 2014. However, the Group continues

to target further improvements to its safety record through ongoing safety training and safety improvement

programs.

2.1.2 Mining

Total material movement for the year was 24.5 million tonnes of which 4.2 million tonnes was ore. Material

movement was slightly below full year expectations, and was negatively impacted by problems with explosives

in December 2014 due to a manufacturing defect of the detonators. This was resolved by early January 2015

with no incidents occurring. Despite this set back, major improvements were seen in the fourth quarter of

2014 as a result of the review of the cut-off grade strategy and improved sequencing of ore and waste fronts.

Average 2014 mine grades of 0.44% Ni was slightly lower than the previous year of 0.46% Ni.

2.1.3 Processing

During the year 5.9 million tonnes of ore was milled, at an average head grade of 0.42% nickel achieving an

average recovery of 49%. Low water availability in the first half of the year, due to less reclaimed water from

the tailings dam, adversely impacted processing; however, the desliming process was functioning at normal

levels again during the second half of the year. The plant was also adversely impacted early in the fourth

quarter of 2014 by electrical problems at the main sub-station, large blocks obstructing the crusher chamber,

and the gyratory crusher eccentric bushing burn out.

A number of operational improvements have been introduced at the plant so as to gain further productivity.

At the primary crusher redundant controls protections have been eliminated which in the past resulted in a

significant amount of lost time, and limited its average capacity to approximately 900t per hour. As a result of

these improvements, the primary crusher is now working at approximately 1,200t to 1,500t per hour, better

reflecting its design capacity.

2.1.4 Sale of concentrate

During the year the Group produced 12,047 tonnes of contained nickel in concentrate, 3,418 tonnes of

contained copper in concentrate, and 221 tonnes of contained cobalt in concentrate. Overall sales for the year

amounted to 9,213 tonnes of nickel in concentrate, with 4,919 tonnes of nickel in concentrate being sold in-

country to an international trading house (ITH) and 4,294 tonnes of nickel in concentrate being sold to Norilsk

Nickel Harjavalta Oy (Norilsk Nickel).

2.1.5 Outlook

2.1.5.1 Mine Plan

The Board approved the Company’s new Mine and Business Plan for 2015 (the Mine Plan) on 10 February

2015. The Mine Plan focuses on streamlining operations and reducing production unit costs. The Mine Plan

targets optimising near-term cashflows given the low and volatile nickel price environment. Production levels

to-date have improved in line with the Mine Plan.

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2.1.5.2 2015 Guidance

The Group has prepared and implemented a revised mine plan whereby a reduced mining volume of

approximately 25Mt per annum is scheduled for 2015.

Based on Mirabela’s new production schedule for 2015 the Company is targeting for 2015:

a planned mining rate of 70,000 tonnes per day (tpd);

a processing rate of 20,000 tpd at an average of 0.50% Ni for the year. A variable cut-off grade and

stockpiling strategy has been implemented;

a total material movement of 25.8 million tonnes;

an average strip ratio of 2.5:1; and

a total nickel production of between 16,500 to 18,000 tonnes of nickel in concentrate.

Production is expected to be steady during the year with an average process recovery at 57%. Unit cash costs

are expected to average between US$4.50 and US$5.00/lb for the 2015 year. The spread in the average unit

cash cost guidance is due to the large number of factors impacting on unit cash cost outcomes, including nickel

price, copper price, and the Brazilian real / US dollar exchange rates.

Capital expenditure for 2015 is forecast at between US$28.8 million and US$34.8 million. Major items include:

mobile equipment rebuilds, tailing storage facility raise, tailings dam spigot system and sustaining mining

expenditure costs. Exploration tenement holding costs and operational optimisation study costs will be

charged to Other Expenses in the Statement of Profit or Loss and Other Comprehensive Income as incurred.

The Company is not anticipating material expenditure on growth activities for 2015.

2.1.5.3 Offtake

Arbitration proceedings under the rules of the Center for Arbitration and Mediation CCBC, Sao Paulo Brazil,

between Mirabela Brazil and Votorantim Metais S.A. (Votorantim) continued during the latter part of the year.

The arbitration proceeding is in relation to the validity of the alleged force majeure claimed by Votorantim and

the obligations of Votorantim under its offtake agreement with Mirabela Brazil. Mirabela Brazil is also

requesting compensation for loss.

An offtake arrangement entered into with an international trading house whilst the Company was under

voluntary administration is due to finish in May 2015.

Following repeated refusals by Norilsk Nickel Harjavalta Oy (Norilsk Nickel) to comply with its obligations

under the Santa Rita Project Concentrate Sales Agreement (Agreement) the Company formally terminated the

Agreement on 24 February 2015. The Company is currently obtaining legal advice in relation to its right to

recover any loss and damage that may arise as a result of Norilsk Nickel’s repudiation of the Agreement.

An offtake agreement has been entered into with an international trading house on 30 January 2015 for

approximately 80% of the Group’s forecast range for 2015 nickel concentrate production.

2.1.5.4 Ore Reserves and Mineral Resources

As part of the overall strategic review of the Group’s mining operations, the Company undertook a complete

review of the Santa Rita Ore Reserves and Mineral Resources. The review was possible as there is sufficient

and meaningful operational data to support reconciliation with previously used assumptions and parameters.

The updated Ore Reserves reduce the projected mine life from 19 years to 14 years because the final phase of

the previous ultimate pit and lower-grade mineralized material will not be mined or processed under current

assumptions. Specifically, the higher strip ratio and lower-grade material require higher nickel prices to be

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economically processed and, therefore, have been re-classified as Mineral Resources (refer to section 2.2 of

this Directors’ Report).

2.1.6 Exploration

The primary exploration strategy currently consists of maintaining certain existing tenements in good standing

and compliance by spending the minimum amounts on capital expenditure, and the release of tenement areas

that management believe have a low prospectivity.

2.2 Ore Reserves and Mineral Resources

The Company’s annual review date of its Mineral Resources and Ore Reserve statements for the purposes of

clause 15 of the 2012 edition of The Australian Code for Reporting of Exploration Results, Mineral Resources

and Ore Reserves (JORC Code) is 31 December 2014.

Ore Reserves

The total Ore Reserve for the Santa Rita project is summarised in the below table:

Santa Rita Proven and Probable Ore Reserves – Open Pit (as at 31 December 2014)

Category Mt Ni (%) Cu (%) MgO (%)

Proven 4.840 0.58% 0.14% 31.2%

Probable 94.407 0.52% 0.15% 27.0%

Total Ore Reserves 99.247 0.52% 0.15% 27.2%

Santa Rita Proven and Probable Ore Reserves – Open Pit (Comparison)

Category Mt Ni (%) Cu (%)

Total Ore Reserves (as at 31 December 2013) 140.2 0.52% 0.13%

Total Ore Reserves mined in 2014 4.2 0.45 % 0.10%

Total Ore Reserves (as at 31 December 2014) 99.247 0.52% 0.15%

Notes:

JORC (2012) definitions were followed for Ore Reserves;

Ore Reserves are estimated at a pit discard Net Smelter Return (NSR) cut-off grade of US$8.81/tonne;

Ore Reserves include mining extraction of 95% and 5% dilution at zero grade;

Ore Reserves are estimated using an average long-term nickel price of US$8.00/lb and a long-term copper

price of $US3.00/lb;

Waste to ore strip ratio of 6.84; and

Numbers may not add due to rounding.

Between 1 January 2014 and 31 December 2014 a total of 4.2 Mt of ore was mined from the Ore Reserves at

an average nickel grade of 0.44%. From inception to 31 December 2014, a total of 23.3 Mt of ore has been

mined from the Santa Rita Mine at an average nickel grade of 0.46%.

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The large decrease in the Ore Reserves is due to a reinterpretation of the ore zones based on the original

exploration drilling data. The new interpretation considers both the mineralogy underlying the nickel grade

and a minimum grade for the mineralized envelopes defined. Operating costs, recovery assumptions,

expected revenue from sales and geotechnical design parameters were reviewed to define updated

operational cut-off grades.

Mineral Resources

The total remaining Mineral Resources for the Santa Rita project as of 31 December 2014 are summarised in

the table below and compared with the total remaining Mineral Resources as at 31 December 2013.

Santa Rita Mineral Resources Table – Comparison

Pit Classification Tonnes

(million) Nickel grade (%)

Copper grade

(%)

Mineral Resource remaining As at 31 December 2014

Open Pit as at 31 December 2014 Measured

Indicated

5.1

132.4

0.60%

0.54%

0.14%

0.15%

Meas. & Ind. 137.5 0.54% 0.15%

Inferred 1.5 0.53% 0.15%

Underground as at 31 December 2014 Inferred - - -

Mineral Resource As at 31 December 2013

Open Pit Measured 13.6 0.51% 0.10%

Indicated 179.7 0.50% 0.13%

Meas. & Ind. 193.3 0.50% 0.13%

Inferred 79.6 0.56% 0.15%

Underground As at 31 December 2013 Inferred 77.0 0.78% 0.22%

Notes:

JORC (2012) definitions were followed for Mineral Resources;

Mineral Resources are estimated at a pit discard NSR cut-off grade of US$8.81/tonne;

Mineral Resources are estimated using an average long-term nickel price of US$11.40/lb and a long-term

copper price of $US3.35/lb;

A minimum mining width of 5 metres was used for preparation of mineralization wireframes;

Average bulk densities were used for each major rock type. Bulk densities varied from 2.76 t/m3

(basement) to 3.26 t/m3 (olivine pyroxenite and pyroxenite units);

Mineral Resources are inclusive of Ore Reserves;

Mineral Resources that are not Ore Reserves do not have demonstrated economic viability; and

Numbers may not add due to rounding.

Governance Arrangements and Internal Controls with respect to Mineral Resources and Reserves

The Company has a number of governance arrangements and internal controls in place with respect to its

estimates and estimation process of its Mineral Resources and Ore Reserves. As set out in the Competent

Persons Statement below, the Company contracts third party independent consultants to review and revise its

Ore Reserves and Mineral Resources on an annual basis. Each Competent Person is independent of the

Company within the meaning of the Canadian National Instrument of Disclosure for Mineral Projects NI 43-101

(NI 43-101).

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The Company undertakes its own ore and concentrate stock pile reconciliations on a monthly basis. The stock

survey results are validated by an independent third party on a quarterly basis and the Company then

reconciles the independent quarterly report against its own records.

Competent Person Statement

The information in this release that relates to Mineral Resources and Ore Reserves was compiled by Roscoe

Postle Associates Inc (RPA). RPA were retained by Mirabela to update the Mineral Resource and Ore Reserve

estimates for the Santa Rita mine and to prepare an independent Technical Report to disclose the results. RPA

and its employees are independent of Mirabela within the meaning of Canadian National Instrument of

Disclosure for Mineral Projects NI 43-101 (NI 43-101).

The mine design, production schedule and estimate of for Ore Reserves were prepared by Mr Hugo Miranda.

Mr Miranda is a Principal Mining Engineer and full-time employee of RPA, and is a registered member of

Chilean Mining Commission. Mr Miranda has sufficient experience that is relevant to the style of

mineralisation and type of deposit under consideration to qualify as a Competent Person as defined under the

2012 Edition of the Australian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves

(JORC Code) and as a Qualified Person in accordance with NI 43-101. Mr Miranda takes responsibility for the

Ore Reserves estimate.

The estimate of Mineral Resources was prepared by Mr Reno Pressacco, P. Geo. Mr Pressacco is a Principal

Geologist and full-time employee of RPA, and is a member of the Association of Professional Geoscientists of

Ontario. Mr Pressacco has sufficient experience that is relevant to the style of mineralisation and type of

deposit under consideration to qualify as a Competent Person as defined under the JORC Code and as a

Qualified Person in accordance with NI 43-101. Mr Pressacco takes responsibility for the Mineral Resource

estimate.

2.3 Executive and Board Changes

2.3.1 Board changes

Mr Richard Newsted was appointed Non-executive Chairman of the Board effective 25 June 2014.

Ms Maryse Belanger was appointed Chief Executive Officer of the Group effective 27 June 2014.

Mr Ross Griffiths was appointed Non-executive Director effective 25 June 2014.

Mr Mark Milazzo was appointed Non-executive Director effective 25 June 2014.

Mr Alastair McKeever was appointed Non-executive Director effective 6 August 2014.

Mr Ian McCubbing was appointed Non-executive Chairman of the Board effective 11 January 2014, replacing

Mr Geoff Handley. Mr McCubbing resigned from the Board effective 7 April 2014.

Mr Geoff Handley resigned as Non-executive Chairman and from the Board effective 11 January 2014.

Mr Purdy resigned from the Board effective 5 May 2014 and resigned as Chief Executive Officer of the Group

effective 31 May 2014.

Mr Peter Nicholson resigned from the Board effective 11 January 2014.

Mr Colin Steyn resigned from the Board effective 11 January 2014.

Mr Nicholas Sheard resigned from the Board effective 7 April 2014.

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2.3.2 Executive changes

Dr Linda Tompkins was appointed Company Secretary of the Group effective 25 June 2014. Dr Tompkins also

retains her position as the Company’s Legal Counsel.

Mr Milson Mundim was appointed Chief Financial Officer of the Group effective 8 September 2014.

Mr Christiaan Els resigned as Company Secretary of the Group effective 19 May 2014 and ceased employment

as Chief Financial Officer effective 1 September 2014.

Mr Anthony Kocken ceased employment as Chief Operations Officer effective 25 August 2014.

2.4 Financial Review

2.4.1 Statement of profit or loss and other comprehensive income

The Group recorded a net profit for the year ended 31 December 2014 of US$382.945 million, representing

earnings of US$0.42 per share, in comparison to a net loss for the year ended 31 December 2013 of

US$493.861 million representing a loss of (US$0.56) per share.

The net profit for the year of US$382.945 million was mainly due to other income (US$503.982 million) which

included debt forgiveness (US$439.715 million) and fair value adjustments to the convertible note option

derivative (US$61.987 million) and foreign exchange movements (US$14.499 million); offset in part by gross

losses (US$30.763 million), net financing costs (US$33.697 million), general administration expenses

(US$27.324 million), and other expenses (US$33.199 million). Net financing costs mainly comprise of net

interest expense relating to the current debts. Foreign exchange losses comprise of realised and unrealised

movements on the conversion of non-USD cash held and borrowings.

2.4.2 Statement of financial position

Total assets decreased by US$5.357 million to US$153.185 million from 31 December 2013. The decrease in

total assets was mainly due to a decrease in inventories (US$12.077 million), trade and other receivables

(US$16.664 million) and cash and cash equivalents (US$13.175 million) offset by capital expenditure

(US$43.874 million).

Total liabilities were US$162.180 million, a decrease of US$372.180 million from 31 December 2013. The

movement in total liabilities was mainly as a result of a decrease in borrowings (US$358.423 million) mainly

attributable to the debt forgiveness, and a decrease in trade and other payables (US$31.095 million), offset in

part by an increase in deferred tax liability (US$8.791 million).

Total deficiency in equity of US$8.995 million at 31 December 2014 decreased by US$366.823 million from 31

December 2013 primarily as a result of a reduction in accumulated losses (US$383.273 million) partially offset

by a decrease in reserves (US$23.746 million). The decrease in reserves was mainly attributable to a decrease

in the foreign currency translation reserve (US$28.486 million); partly offset by an increase in hedging reserves

(US$4.740 million). Contributed equity increased by US$7.296 million representing costs relating to the debt

raisings.

2.4.3 Impairment

The Group identified impairment indicators such as the challenging nickel market conditions based on LME

nickel prices, the termination of one of the Company’s two off-take contracts (as outlined in Note 2 of the

consolidated financial statements), and a significant change to the Group’s ore reserves and mineral resources,

and as such the Group performed an impairment test on the recoverability of its assets using consensus

analyst nickel price assumptions as at 31 December 2014. Based on the results of the test, the Group is of the

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opinion that no impairment exists for the reporting period ended 31 December 2014. However, any material

negative change in the above assumptions may result in a future impairment occurring.

2.4.4 Statement of cash flows

During the year, cash and cash equivalents decreased by US$13.175 million.

Cash outflows from operating activities for the period were US$50.298 million. Cash receipts of US$136.336

million reflected the sale of 9,213 tonnes of nickel in concentrate, and associated by-products, to Norilsk

Nickel and to an international trading house (ITH), offset by cash outflows of US$187.961 million, driven

primarily by operational costs.

Net cash outflows from investing activities for the period were US$43.874 million. The cash outflows primarily

related to ongoing works on the tailings dam wall, equipment rebuilds and deferred stripping costs.

The net cash inflow from financing activities of US$83.678 million mainly reflects proceeds from the Senior

Convertible Secured Notes, partially offset by repayment of borrowings (US$12.275 million) and payment of

interest (US$4.047 million).

2.4.5 Financing

As announced on 25 June 2014, the Company successfully completed its restructure when the Deed of

Company Arrangement (DOCA) was fully effectuated, the Deed Administrators retired, the DOCA terminated

and the day-to-day management of the Company reverted to the Company’s directors.

The various restructure events were as follows:

The Senior Unsecured Noteholder debt of US$395.000 million 8.75% Senior Unsecured Notes due 15 April

2018 (Original Noteholders) and incurred interest were extinguished on 25 June 2014, and in return the

Original Noteholders became entitled to approximately 98.2% of the Company’s ordinary shares on issue

at that time (DOCA Shares). The DOCA Shares were transferred from existing shareholders of the

Company (by order of the Supreme Court of New South Wales) to a trustee who holds them as bare

trustee (Mirabela Investments Pty Ltd) for the Original Noteholders.

US$115.000 million 9.50% Senior Convertible Secured Notes (SCSN) due 24 June 2019 were issued for cash

on 24 June 2014 (further details regarding the SCSNs is contained in Note 24 of the consolidated financial

statements):

The SCSNs are convertible into Mirabela ordinary shares at the discretion of the SCSN Holders up to

the maturity date of 24 June 2019. No SCSNs were converted into Mirabela ordinary shares as at 31

December 2014; and

Mirabela has the option to redeem the SCSNs on or after the third anniversary of the issuance of the

SCSNs, based on specified terms.

US$5.000 million of 1.00% Subordinated Unsecured Notes due 2044 were issued to all former Noteholders

on 10 September 2014.

3 REMUNERATION REPORT - AUDITED

This remuneration report for the year ended 31 December 2014 outlines the remuneration arrangements of

the Group in accordance with the requirements of the Corporations Act 2001 (Cth) (Act) and its regulations.

The remuneration report details the remuneration arrangements for key management personnel (KMP) who

are defined as those persons having authority and responsibility for planning, directing and controlling the

major activities of the Group, directly or indirectly, including any director (whether executive or otherwise).

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The report contains the following sections:

3.1 Key Management Personnel covered by this Remuneration Report

3.2 Remuneration Governance

3.3 Use of Remuneration Consultants

3.4 Principles of Remuneration

3.5 Executive Remuneration Framework and Perfomance Pay Outcomes

3.6 Key Management Personnel Service Contracts

3.7 Summary of Remuneration

The Group notes that the 2013 Remuneration Report was adopted by Shareholders at the Annual General

Meeting held on 26 August 2014.

On 18 March 2013, the previous Remuneration and Nomination Committee (previous Committee) suspended

and subsequently cancelled the remaining performance rights of its previous performance rights plan (being

the “Mirabela Nickel Limited Performance Rights Plan” originally approved at a Shareholders meeting held on

13 September 2010). The performance rights pertaining to the plan that were in a holding lock were to be

allowed to vest at the completion of the vesting period, however, on 10 January 2014 the previous Committee

suspended these performance rights.

On 10 January 2014 the previous Committee also suspended the “2013 Mirabela Nickel Limited Long Term

Incentive Plan” (LTI) – which was originally approved at a Shareholders meeting held on 30 May 2013. The LTI

was subsequently cancelled by Martin Madden in his capacity as joint and several administrator of Mirabela

Nickel Limited on 5 May 2014. As such, no KMP was entitled to receive any LTI benefits for 2014.

3.1 Key Management Personnel covered by this Remuneration Report

The following were KMPs of the Group at any time during the financial year and unless otherwise indicated

KMPs for the entire period:

[Table 1: Key Management Personnel]

Non-executive Directors Executive Directors Executives

Mr Richard Newsted(1)

Mr Maryse Belanger(10)

Dr. Linda Tompkins – Company Secretary(12)

Mr Ross Griffiths(2)

Mr Ian Purdy(11)

Mr Milson Mundim – Chief Financial Officer(13)

Mr Mark Milazzo(3)

Mr Alastair McKeever(4)

Mr Christiaan Els - Chief Financial Officer & Company

Secretary(14)

Mr Geoffrey Handley(5)

Mr Anthony Kocken – Chief Operating Officer(15)

Mr Ian McCubbing(6)

Mr Peter Nicholson(7)

Mr Nicholas Sheard(8)

Mr Colin Steyn(9)

(1) Mr Newsted was appointed Chairman of the Board effective 25 June 2014. (2) Mr Griffiths was appointed Non-executive Director effective 25 June 2014. (3) Mr Milazzo was appointed Non-executive Director effective 25 June 2014. (4) Mr McKeever was appointed Non-executive Director effective 6 August 2014.

(5) Mr Handley resigned from the Board effective 11 January 2014. (6) Mr McCubbing resigned from the Board effective 7 April 2014. (7) Mr Nicholson resigned from the Board effective 11 January 2014. (8) Mr Sheard resigned from the Board effective 7 April 2014. (9) Mr Steyn resigned from the Board effective 11 January 2014. (10) Ms Belanger was appointed Executive Director and Chief Executive Officer of the Group effective 27 June 2014. (11) Mr Purdy resigned from the Board effective 5 May 2014 and resigned as Chief Executive Officer of the Group effective 31 May 2014. (12) Dr Tompkins was appointed Company Secretary effective 25 June 2014.

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(13) Mr Mundim was appointed Chief Financial Officer of the Group effective 8 September 2014.

(14) Mr Els resigned as Company Secretary of the Group effective 19 May 2014 and ceased employment as Chief Financial Officer of the Group effective 1 September 2014.

(15) Mr Kocken ceased employment as Chief Operations Officer effective 25 August 2014.

There were no other changes to KMPs after the reporting date and before the date of the financial report.

3.2 Remuneration Governance

The Remuneration and Nomination Committee (the Committee) of the Board of Directors (the Board) is

responsible for determining the remuneration arrangements for KMPs and other senior management and

making recommendations to the Board. The Committee currently comprises the four Non-executive Directors

of the Group, these being: Mr Richard Newsted, Mr Ross Griffiths, Mr Mark Milazzo and Mr Alastair McKeever.

The Committee reviews remuneration levels and other terms of employment on an annual basis having regard

to relevant market conditions, strategy of the Group, qualifications and experience of the KMPs and

performance against targets set for each year.

In prior years the previous Committee obtained independent advice on the appropriateness of remuneration

packages of the Group given trends in comparative companies both locally and internationally, and the

objectives of the Group’s remuneration strategy.

3.3 Use of Remuneration Consultants

During the year ended 31 December 2014, the Board did not use an independent remuneration consultant to

provide advice on remuneration matters. However, for 2015 and onwards the intention of the Board is to

again obtain independent remuneration consulting advice.

3.4 Principles of Remuneration

The performance of the Group depends on the quality of the KMPs it employs. To be successful in a global

market, the Group must attract, motivate and retain KMPs of the highest calibre.

The Group embraces the following remuneration principles to secure a successful business:

Remuneration must be competitive, equitable and fair to attract and retain high calibre KMPs;

Remuneration must recognise the competitive global market in which the Group operates;

Remuneration must reward Group and individual performance across a range of disciplines and be

measured against benchmarked targets; and

Remuneration must link rewards with protecting and creating shareholder value.

3.5 Executive Remuneration Framework and Performance Pay Outcomes

The Group’s executive KMP total remuneration structure provides for:

Fixed remuneration;

Short-term, performance linked cash remuneration (STI); and

Long-term, performance linked equity remuneration (LTI).

Table 2 below shows the proportion of each element of total remuneration for 2014, at target maximum

opportunities, for the executive KMPs, noting that no LTI entitlement was in place during the year.

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[Table 2: Executive KMP Remuneration Mix]

3.5.1 Fixed remuneration

Fixed remuneration comprised base salary and employer superannuation contributions.

During 2014, all Brazilian employees were awarded a salary increase of 5.81% under the annual union

collective-agreement negotiation. All Australian employees, including Australian executive KMPs, did not

receive an increase for 2014.

3.5.2 Short-term, performance-linked remuneration

The Group operates a short-term, performance-linked, incentive program (STI) which provides annual cash

awards for the achievement of specific objectives.

Australian KMPs

Due to the restructure/recapitalisation events that occurred during 2014 no specific STI objectives were set by

the previous Board for Australian KMPs. However, the CEO recommended to the current Board that a set

percentage (maximum entitlement) of fixed remuneration be awarded to Australian KMPs, other than herself,

for the 2014 STI based on their performance, as no specific objectives had been set. Australian KMPs

comprised Ms Maryse Belanger, Dr Linda Tompkins and Mr Milson Mundim. Mr Mundim is the Chief Financial

Officer for both the Company and Mirabela Brazil. As such, his STI component was comprised of the Brazilian

KMP outcome, as noted below, and the Australian KMP fixed allocation previously commented on. The

Australian component represents the maximum entitlement less the achieved Brazilian component (as

outlined in Table 3). The Board approved the 2014 STI recommendations of the CEO.

Brazilian KMPs

Production, Cost and Environment Targets for Brazilian KMP and employees were reflected in the Mirabela

Brazil’s Profit Sharing Plan (Plano de Participao nos Lucros ou Resultados) (PPR), with target maximum

opportunity ranging from 22.5% to 70% of fixed remuneration.

The STI objectives set for the PPR were as per Table 3 below:

57% 61%

43% 39% STI

Fixed

AT

RIS

K

FIX

ED

CEO Other Mirabela KMPs (weighted)

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[Table 3: Brazilian KMP 2014 STI Objectives]

Category

Brazilian

STI

Weightings Overview of STI Objectives

Achieved

Contained Nickel

Production

38% Contained Nickel Production to be based on a sliding scale commencing from

12,833t with Stretch set at 14,000t.

Nil

Cost 37% Based on a combination of unit mining cost, unit processing cost, total

administration cost and capital expenditure. To achieve stretch bonus, all four

cost targets must be met and budget cost savings of greater than R$9.000 million

(80% achievement) to R$18.000 million (100% achievement). All targets are in

local currency (Brazilian Real).

Nil

Environment 25% Full compliance with the environmental conditions of the Environmental Institute

of Bahia.

100%

Total Weighting 100%

3.5.2.1 STI performance pay outcome

Table 4 below sets out the 2014 STI awards for executive KMPs. In terms of the Brazilian STI outcomes, as

noted above, the Committee assessed the results by making appropriate enquiries of management, reviewing

management information reports, and reviewing external reports where applicable.

[Table 4: Executive KMP STI Awards for 2014]

Included in Remuneration

Maximum STI as a % of

salary

% of STI achieved in

year

% of STI forfeited in

year

US$ % % %

Maryse Belanger 172,911 75 100 -

Linda Tompkins 65,349 60 100 -

Milson Mundim(1)

: Australian STI award Brazilian STI award

36,592 12,612

70 70

100

18

-

82

(1) The full STI award represents a 100% entitlement. The Australian component is the differential between the 100% entitlement and the

achieved Brazilian STI award.

Amounts included in remuneration for the financial year represent the amounts that became due in the

financial year as recommended by the CEO and approved by the Board. Amounts forfeited are due to the

performance or service criteria not being met in relation to the current financial year. No amounts vest in

future financial years in respect of the STI for the 2014 financial year.

3.5.3 Long-term, performance linked remuneration

On 10 January 2014 the previous Committee suspended the “2013 Mirabela Nickel Limited Long Term

Incentive Plan” (LTI) – which was originally approved at a Shareholders meeting held on 30 May 2013. The LTI

was subsequently cancelled by Martin Madden in his capacity as joint and several administrator of Mirabela

Nickel Limited on 5 May 2014.

3.5.3.1 LTI performance pay outcome

As the LTI was cancelled on 5 May 2014, no KMP was entitled to receive any LTI benefits for 2014.

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3.5.4 Consequences of performance on shareholder wealth

In terms of performance and benefits for shareholder wealth, the Group considered share price performance and earnings in relation to the broader market conditions and

internal circumstances. In addition to the above, the Group had regard to the following indices in respect of the current and previous financial years (as noted in Table 5):

[Table 5]

Measure 31 December 2014 31 December 2013 31 December 2012 31 December 2011 31 December 2010

ASX Share Price at Year End (A$) 0.029(3) 0.02 0.48 1.12 2.28

TSX Share Price at Year End (C$)(4) N/A N/A 0.50 1.17 2.38

Profit/(Loss) for the Period (US$ million)

382.945 (493,861) (452.875) (50.761) (47.618)

EBITDA(1) (US$ million) (58.168) (26.391) 45.327 14.615 35.745

Dividends Paid - - - - -

Return of Capital - - - - -

Sales Revenue (US$ million) 137.677 194.180 343.398 303.642 210.975

Realised Nickel Price (US$/lb) 7.24 6.46 7.46 10.04 9.43

Production Unit Cash Cost (US$/lb)(2) 7.16 5.80 5.82 7.27 7.00

Nickel Production (dmt) 12,047 15,626 19,253 15,854 10,375

Mined Tonnes (Mt) 24.5 38.0 38.5 40.8 29.1

Processed Tonnes (Mt) 5.9 6.5 6.5 5.4 3.8

(1) EBITDA, as used by the Group, is unaudited and defined as earnings before net financial expense, net derivative loss, net foreign exchange gain/loss, taxation, other expenses - net, depreciation, amortisation, depletion, impairment charge and net realisable value adjustment to inventory (refer section 4 of the Directors’ Report).

(2) Production Unit Cash Cost is unaudited (refer section 4 of the Directors’ Report). (3) The Company was in voluntary trading suspension on the Australian Stock Exchange (ASX) from 17 December 2014 to 16 February 2015. The price reflects the last share trade before suspension. (4) The Company de-listed from the Toronto Stock Exchange (TSX) on 4 October 2013, due to the limited trading volume of the Company’s shares on the TSX over a sustained period of time.

The 2014 profit included debt forgiveness of US$439.715 million and fair value adjustments to the senior convertible secured note derivative of US$61.987 million. The

2013 loss for the period included a non-cash impairment charge of US$331.182 million relating to historical capitalised expenditure (2012 included an impairment charge of

US$380.000 million).

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3.6 Key Management Personnel Service Contracts

Remuneration arrangements for executive KMPs were formalised in employment contracts. Details of these

contracts are provided below:

Ms Maryse Belanger, Chief Executive Officer (CEO) & Managing Director, entered into an employment contract

with the Group effective 27 June 2014. As part of Ms Belanger’s employment contract, she is entitled to

receive additional benefits such as school fees, airfares, relocation costs, housing and car allowances and costs

of repatriation. The contract is unlimited in term but capable of termination upon three months’ notice by

either party in writing. In the event the Group terminates Ms Belanger’s employment without cause due to

redundancy, Ms Belanger is entitled to a payment equal to six months’ salary inclusive of notice. If Ms

Belanger terminates the employment due to serious or persistent breach by the Company of any provisions of

the employment contract that is not remedied within twenty days, then she is entitled to a payment equal to

twelve months base remuneration including payment in lieu of notice. As part of the contract, Ms Belanger is

entitled to participate in any Group incentive schemes.

Dr Linda Tompkins, Company Secretary and Legal Counsel, entered into an employment contract with the

Group as Legal Counsel effective 19 October 2011 and was appointed Company Secretary on 25 June 2014.

The contract is unlimited in term but capable of termination upon three months’ notice by either party in

writing. In the event the Group terminates Dr Tompkins’ employment without cause due to redundancy, Dr

Tompkins is entitled to a payment equal to six months’ salary inclusive of notice. As part of the contract, Dr

Tompkins is entitled to participate in any Group incentive schemes.

Mr Milson Mundim, Chief Financial Officer (CFO), entered into an employment contract with the Group

effective 8 September 2014. As part of Mr Mundim’s employment contract, he is entitled to receive additional

benefits such as health insurance and life insurance. The contract is unlimited in term but capable of

termination upon three months’ notice by either party in writing. In the event the Group terminates Mr

Mundim’s employment without cause due to redundancy, Mr Mundim is entitled to a payment equal to six

months’ salary inclusive of notice. If Mr Mundim terminates the employment due to serious or persistent

breach by the Company of any provisions of the employment contract that is not remedied within twenty

days, then he is entitled to a payment equal to twelve months base remuneration including payment in lieu of

notice. As part of the contract, Mr Mundim is entitled to participate in any Group incentive schemes.

Mr Ian Purdy, Chief Executive Officer (CEO) & Managing Director (resigned as director effective 5 May 2014

and resigned as CEO effective 31 May 2014), had entered into a new employment contract on 16 April 2013

with the Group. The contract was unlimited in term but capable of termination upon three months’ notice by

either party. In the event the Group terminated Mr Purdy’s employment without cause due to redundancy,

material diminution of his position, remuneration package, responsibilities, reporting lines and/or primary

place of work, Mr Purdy was entitled to a payment equal to twelve months’ salary as approved by the

shareholders at the Annual General Meeting held on 30 May 2013. As part of the contract, Mr Purdy was

entitled to participate in any Group incentive schemes.

Mr Christiaan Els, Chief Financial Officer (CFO) & Company Secretary (resigned as Company Secretary effective

19 May 2014 and resigned as CFO effective 1 September 2014), had entered into a new employment contract

with the Group on 30 May 2013. The contract was unlimited by term but capable of termination upon three

months’ notice by either party. In the event the Group terminated Mr Els’ employment without cause, Mr Els

was entitled to a payment equal to twelve months’ salary inclusive of notice as approved by the shareholders

at Annual General Meeting held on 30 May 2013. As part of the contract, Mr Els was entitled to participate in

any Group incentive schemes.

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Mr Anthony Kocken, Chief Operating Officer (COO) (ceased employment as COO effective 25 August 2014),

had entered into a new employment contract with Mirabela Brazil on 30 May 2013. The contract was

unlimited by term but capable of termination upon three months’ notice by either party. In the event

Mirabela Brazil terminated Mr Kocken’s employment without cause, Mr Kocken was entitled to twelve

months’ salary, inclusive of notice as approved by the shareholders at Annual General Meeting held on 30 May

2013. As part of the contract, Mr Kocken was entitled to participate in any Mirabela Brazil incentive schemes.

3.7 Summary of Remuneration

3.7.1 Non-executive Director KMP remuneration

The aggregate total remuneration for Non-executive Director KMPs was determined from time to time by

shareholders in a General Meeting. The current total aggregate remuneration payable to Non-executive

Director KMPs may not exceed A$1,000,000 (US$902,800) per annum.

The previous Committee considered, on an annual basis, independent remuneration advice as well as fees paid

to Non-executive Director KMPs of comparable companies in determining the quantum and apportionment of

the remuneration for the year. In recognition of the difficult financial position the Group was in during 2014

the previous Board and the current Board did not increase the total aggregate of Non-executive Director KMP

fees during 2014.

Non-executive Director KMPs received fixed remuneration, including superannuation but did not receive any

share based payments nor participated in any incentive programs, in line with ASX Corporate Governance

principles. Non-executive Director KMPs were encouraged to own shares in the Group.

No additional payments were made to Non-executive Director KMPs for committees, except for the Chair of

the previous Board Audit Committee and the current Board Audit & Risk Committee.

In terms of annual fixed remuneration, the Non-executive Directors are currently entitled to receive the

following:

Chairman of the Board A$180,000 (US$162,504);

Chairman of the Audit and Risk Committee A$140,000 (US$126,392); and

Other Non-Executive Directors A$100,000 (US$90,280).

Table 6a sets out the fixed remuneration of the Non-executive Director KMPs for 2014.

3.7.2 Remuneration review

The following section itemises the remuneration components for the KMPs.

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Table 6a below outlines the statutory KMP remuneration for 2014, based on International Financial Reporting Standards requirements.

[Table 6a]

US$ Performance Rights (Expensed during the Period) relating to

31 December 2014

Short-term

salaries and

fees

STI/Retention(12)

cash bonus

Non-

monetary

benefits

Annual leave

expense

Post-

employment

super

contributions

Termination

Payments

Performance

conditions

achieved

Performance

conditions

not yet achieved

Performance

conditions

cancelled

(7)

Remuneration

Entitlement

Performance

related

proportion of

remuneration

entitlement

Value of

performance

rights as a

proportion of

remuneration

entitlement

Directors US$ US$ US$ US$ US$ US$ US$ US$ US$ US$ % %

Executive Directors

Maryse Belanger(1) 222,706 172,911 109,187 16,867 - - - - - 521,671 33 -

Ian Purdy(2) 483,537 - - 24,840 9,491 369,910(13) - - 134,593 1,022,371 13 13

Non-executive Directors

Richard Newsted(3) 82,488 - - - - - - - - 82,488 - -

Ross Griffiths(3) 58,913 - - - 5,597 - - - - 64,510 - -

Mark Milazzo(3) 42,081 - - - 3,998 - - - - 46,079 - -

Alastair McKeever(4) - - - - - - - - - - - -

Geoffrey Handley(5) 13,288 - - - 1,229 - - - - 14,517 - -

Ian McCubbing(6) 38,528 - - - 2,123 - - - - 40,651 - -

Peter Nicholson(5) 7,480 - - - - - - - - 7,480 - -

Nicholas Sheard(6) 19,806 - - - - - - - - 19,806 - -

Colin Steyn(5) 7,383 - - - - - - - - 7,383 - -

Executives

Dr. Linda Tompkins(8) 114,531 65,349 - 8,998 15,377 - - - - 204,255 32 -

Milson Mundim(9) 74,692 49,204 2,913 8,166 - - - - - 134,975 36 -

Christiaan Els(10) 275,706 267,083(12) - 21,093 16,116 431,190(13) - - 39,008 1,050,196 29 4

Anthony Kocken(11) 219,476 - 26,153 - - - - - 39,154 284,783 14 14

1,660,615 554,547 138,253 79,964 53,931 801,100 - - 212,755 3,501,165 For

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(1) Ms Belanger was appointed Executive Director and Chief Executive Officer of the Group effective 27 June 2014. (2) Mr Purdy resigned as a director from the Board effective 5 May 2014 and resigned as Chief Executive Officer of the Group effective 31 May 2014. (3) Mr Newsted, Mr Griffiths and Mr Milazzo were appointed Non-executive Directors of the Board effective 25 June 2014. (4) Mr McKeever was appointed Non-executive Director effective 6 August 2014. As a nominee director Mr McKeever does not receive any payments from the Group. (5) Mr Handley, Mr Nicholson and Mr Steyn resigned from the Board effective 11 January 2014. (6) Mr McCubbing and Mr Sheard resigned from the Board effective 7 April 2014. (7) In relation to the Company’s “2013 Mirabela Nickel Limited Long Term Incentive Plan’s” 2013 non-market condition pertaining to adjusted EBITDA per Share and 2013 market performance condition pertaining to a Relative TSR were lapsed.

This Plan was suspended by the previous Board on 10 January 2014 and subsequently cancelled by Martin Madden in his capacity as joint and several administrator of Mirabela Nickel Limited on 5 May 2014. (8) Dr Tompkins was appointed Company Secretary effective 25 June 2014. The remuneration contained in Table 6a represents remuneration earned subsequent to becoming Company Secretary. (9) Mr Mundim was appointed Chief Financial Officer of the Group effective 8 September 2014. (10) Mr Els resigned as Company Secretary of the Group effective 19 May 2014 and ceased employment as Chief Financial Officer of the Group effective 1 September 2014. (11) Mr Kocken ceased employment as Chief Operations Officer effective 25 August 2014. (12) For 2014 the previous Board had approved a retention bonus scheme for the Australian corporate office, its purpose being to incentivise eligible employees, including executive KMPs, to continue providing services for the duration of the

restructure process. This was also ratified by the Deed Administrators subsequent to their appointment. The amount received by Mr Els related solely to the retention bonus. (13) Mr Purdy’s termination payment was based on six months of his fixed remuneration. Mr Els termination payment was based on twelve months of his fixed remuneration. Both of these were in accordance with their contracts.

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Table 6b below outlines the statutory KMP remuneration for 2013, based on International Financial Reporting Standards requirements.

[Table 6b]

US$ Performance Rights (Expensed during the Period) relating to

31 December 2013

Short-term

salaries and

fees

STI

cash bonus

Non-

monetary

benefits

Annual leave

expense

Post-

employment

super

contributions

Termination

Payments

Performance

conditions

achieved

(5)

Performance

conditions

not yet achieved

(6)

Performance

conditions

lapsed/cancelled

(7)

Remuneration

Entitlement

Performance

related

proportion of

remuneration

entitlement

Value of

performance

rights as a

proportion of

remuneration

entitlement

Directors US$ US$ US$ US$ US$ US$ US$ US$ US$ US$ % %

Executive Directors

Ian Purdy(2) 934,385 238,188 - 59,342 24,200 - 46,068 66,304 57,270 1,425,757 29 12

Non-executive Directors

Geoffrey Handley(1) 174,243 - - - 15,889 - - - - 190,132 - -

Ian McCubbing(3) 124,332 - - - 11,338 - - - - 135,670 - -

Peter Nicholson(1) 96,802 - - - - - - - - 96,802 - -

Nicholas Sheard(3) 96,802 - - - - - - - - 96,802 - -

Colin Steyn(1) 96,802 - - - - - - - - 96,802 - -

Executives

Christiaan Els(8) 435,349 105,848 - 33,612 24,200 - 31,793 19,216 38,107 688,125 28 13

Anthony Kocken 463,710 106,246 37,205 5,441 4,336 - 31,912 19,288 38,250 706,388 28 13

William Bent(4) 31,863 - - 2,263 6,133 46,844 - - - 87,103 - -

2,454,288 450,282 37,205 100,658 86,096 46,844 109,773 104,808 133,627 3,523,581 (1) Mr Handley, Mr Nicholson and Mr Steyn resigned from the Board effective 11 January 2014. (2) Mr Purdy resigned as a director from the Board effective 5 May 2014 and resigned as Chief Executive Officer of the Group effective 31 May 2014. (3) Mr McCubbing and Mr Sheard resigned from the Board effective 7 April 2014. (4) Mr Bent resigned from the Company effective 31 January 2013. (5) In relation to 2011 non-market strategic objectives which vested on 31 December 2012 at a reduced allocation percentage and were converted to Shares on 23 January 2013; and 2012 non-market strategic objectives pertaining to cost

reduction (at a reduced allocation percentage), optimisation (fully achieved) and exploration goals (fully achieved) with a vesting date of 31 December 2013 but which were suspended by the Committee on 10 January 2014. (6) In relation to the Company’s “2013 Mirabela Nickel Limited Long Term Incentive Plan’s” 2013 non-market condition pertaining to Adjusted EBITDA per Share and 2013 market performance condition pertaining to a Relative TSR. This Plan was

suspended by the Committee on 10 January 2014. (7) In relation to 2012 non-market strategic objective pertaining to organic growth and 2012 market performance objective which were suspended and subsequently cancelled by the Committee on 18 March 2013 - values based on grant date

valuation. The KMPs will not receive any benefit from these performance rights. (8) Mr Els resigned as Company Secretary of the Group effective 19 May 2014. Mr Els continued employment with the Company as Chief Financial Officer.

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For Tables 6a and 6b above, exchange rates used to convert the AUD to USD and BRL to USD, respectively were as

follows:

- Monthly average rates ranging from 0.938 to 0.885 for the year ended 31 December 2014 (31 December 2013:

1.050 to 0.898).

- Monthly average rates ranging from 0.420 to 0.379 for the year ended 31 December 2014 (31 December 2013:

0.507 to 0.426).

3.7.3 Equity instruments

3.7.3.1 Performance rights issued as remuneration

No performance rights were issued as remuneration or exercised by executive KMPs during the year ended 31

December 2014 (31 December 2013: refer Table 7 below).

On 18 March 2013, the previous Board suspended and subsequently cancelled the remaining performance rights of

its previous performance rights plan (being the “Mirabela Nickel Limited Performance Rights Plan” originally

approved at a Shareholders meeting held on 13 September 2010). The performance rights pertaining to the

previous plan that were in a holding lock were to be allowed to vest at the completion of the vesting period,

however, on 10 January 2014, the previous Committee suspended these performance rights.

On 10 January 2014 the previous Committee also suspended the “2013 Mirabela Nickel Limited Long Term Incentive

Plan” (LTI) – which was originally approved at a Shareholders meeting held on 30 May 2013. The LTI was

subsequently cancelled by Martin Madden in his capacity as joint and several administrator of Mirabela Nickel

Limited on 5 May 2014. As such, no KMP was entitled to receive any LTI benefits for 2014.

Due to the cancellation of the LTI, accounting standards require the uninvested share based payment expense to be

accelerated and recognised in the consolidated statement of profit or loss and other comprehensive income. These

are the amounts shown in Table 6a.

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[Table 7]

31 December 2013

Directors

Number of

performance

rights

issued/granted

Jan-Dec 2013 Grant Date

Fair value of

performance

rights at

grant date A$ Expiry date(1)

Number of

performance

rights vested

Jan-Dec 2013

Executive

Ian Purdy 2012 non-market strategic objectives (cost

reduction, optimisation and exploration

goals)(2)

- 9 Feb 2012 0.99 1 Jan 2014 121,985

2013 non-market condition (adjusted

EBITDA per Share)

886,427 30 May 2013 0.18 31 Dec 2015 -

2013 market performance condition (RTSR) 886,427 30 May 2013 0.07 31 Dec 2015 -

Executives

Christiaan Els 2012 non-market strategic objectives (cost


goals)(2)

- 9 Feb 2012 0.99 1 Jan 2014 70,753


EBITDA per Share)

256,903 30 May 2013 0.18 31 Dec 2015 -


Anthony Kocken 2012 non-market strategic objectives (cost


goals)(2)

- 9 Feb 2012 0.99 1 Jan 2014 71,020


EBITDA per Share)

257,870 30 May 2013 0.18 31 Dec 2015 -


(1) The performance rights were subject to both service conditions and performance conditions (Refer note 12 of the consolidated financial statements). (2) These performance rights were subject to a twelve month service condition but were suspended by the previous Committee on 10 January 2014.

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3.7.3.2 Analysis of performance rights

Details of vesting profiles of the performance rights granted as remuneration to executive KMPs of the Group are

detailed in Table 8 below:

[Table 8]

(1) The % forfeited/cancelled in the year represents the reduction from the maximum number of rights available to vest due to performance criteria not being achieved. (2) Subject to a twelve month service condition. (3) These performance rights were subject to a twelve month service condition but were suspended by the previous Committee on 10 January 2014. (4) These performance rights were cancelled by the previous Board on 10 January 2014.

Directors

Number of

performance

rights issued/

granted Grant Date

Performance

condition

successfully

achieved(2)

% forfeited/

cancelled

during the

year(1)

Date on

which grant

vests

Executive

Ian Purdy 2012 non-market strategic objectives (cost


goals)(3)

135,539 9 Feb 2012 90% - 31 Dec 2013

2013 non-market condition (adjusted EBITDA

per Share)(4)

886,427 30 May 2013 0% 100% 31 Dec 2015

2013 market performance condition (RTSR)(4)

886,427 30 May 2013 0% 100% 31 Dec 2015

Executives

Christiaan Els 2012 non-market strategic objectives (cost


goals)(3)

78,615 9 Feb 2012 90% - 31 Dec 2013


per Share)(4)

256,903 30 May 2013 0% 100% 31 Dec 2015


256,902 30 May 2013 0% 100% 31 Dec 2015

Anthony Kocken 2012 non-market strategic objectives (cost


goals)(3)

78,911 9 Feb 2012 90% - 31 Dec 2013


per Share)(4)

257,870 30 May 2013 0% 100% 31 Dec 2015


257,869 30 May 2013 0% 100% 31 Dec 2015

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3.7.3.3 Movement in performance rights

The movement during the financial year in the number of performance rights in the Company held, directly,

indirectly or beneficially, by each KMP, including their related parties, is as follows:

31 December 2014

Held at

1 January

2014

Granted/

issued

as

compensation

Converted

to

shares

Cancelled or

forfeited

Held at

31 December

2014

Vested

during the

year

Vested and

exercisable at

31 December

2014

Directors

Richard Newsted (1)

- - - - - - -

Maryse Belanger (2)

- - - - - - -

Ross Griffiths (3)

- - - - - - -

Mark Milazzo (4)

- - - - - - -

Alastair McKeever (5)

- - - - - - -

Geoffrey Handley(6)

- - - - - - -

Ian Purdy(7)

1,894,839 - - (1,772,854) 121,985 - -

Ian McCubbing(8)

- - - - - - -

Peter Nicholson(9)

- - - - - - -

Colin Steyn(10)

- - - - - - -

Nicholas Sheard(11)

- - - - - - -

Executives - - - - - - -

Dr. Linda Tompkins(12)

176,028 - - (154,722) 21,306 - -

Milson Mundim(13)

- - - - - - -

Christiaan Els(14)

584,558 - - (513,805) 70,753 - -

Anthony Kocken (15)

586,759 - - (515,739) 71,020 - -

3,242,184 - - (2,957,120) 285,064 - -

(1) Mr Newsted was appointed Chairman of the Board effective 25 June 2014. (2) Ms Belanger was appointed Executive Director and Chief Executive Officer of the Group effective 27 June 2014. (3) Mr Griffiths was appointed Non-executive Director effective 25 June 2014. (4) Mr Milazzo was appointed Non-executive Director effective 25 June 2014. (5) Mr McKeever was appointed Non-executive Director effective 6 August 2014. (6) Mr Handley resigned from the Board effective 11 January 2014. (7) Mr Purdy resigned from the Board effective 5 May 2014 and resigned as Chief Executive Officer of the Group effective 31 May 2014. (8) Mr McCubbing resigned from the Board effective 7 April 2014. (9) Mr Nicholson resigned from the Board effective 11 January 2014. (10) Mr Steyn resigned from the Board effective 11 January 2014. (11) Mr Sheard resigned from the Board effective 7 April 2014. (12) Dr Tompkins was appointed Company Secretary effective 25 June 2014, and these rights were issued prior to Dr Tompkins becoming a KMP. (13) Mr Mundim was appointed Chief Financial Officer of the Group effective 8 September 2014. (14) Mr Els resigned as Company Secretary of the Group effective 19 May 2014 and ceased employment as Chief Financial Officer of the Group effective 1 September

2014. (15) Mr Kocken ceased employment as Chief Operations Officer effective 25 August 2014.

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31 December 2013

Held at

1 January

2013

Granted/

issued

as

compensation

Converted

to

shares

Cancelled

or

forfeited

Held at

31

December

2013

Vested

during the

year

Vested and

exercisable at

31 December

2013

Directors

Geoffrey Handley(1)

- - - - - -

Ian Purdy(2)

734,650 1,772,854 (70,509) (542,156) 1,894,839 - 121,985

Ian McCubbing(3)

- - - - - - -

Peter Nicholson(4)

- - - - - - -

Colin Steyn(5)

- - - - - - -

Nicholas Sheard(6)

- - - - - - -

Executives

Christiaan Els(8)

209,523 513,805 (20,846) (117,924) 584,558 - 70,753

Anthony Kocken 189,386 515,739 - (118,366) 586,759 - 71,020

William Bent(7)

17,168 - (17,168) - - - -

1,150,727 2,802,398 (108,523) (778,446) 3,066,156 - 263,758

(1) Mr Handley resigned from the Board effective 11 January 2014. (2) Mr Purdy resigned from the Board effective 5 May 2014 and resigned as Chief Executive Officer of the Group effective 31 May 2014. (3) Mr McCubbing resigned from the Board effective 7 April 2014. (4) Mr Nicholson resigned from the Board effective 11 January 2014. (5) Mr Steyn resigned from the Board effective 11 January 2014. (6) Mr Sheard resigned from the Board effective 7 April 2014 (7) Mr Bent resigned from the Company effective 31 January 2013. (8) Mr Els resigned as Company Secretary of the Group effective 19 May 2014 and ceased employment as Chief Financial Officer of the Group effective 1

September 2014.

3.7.3.4 Movement in ordinary shares

The movement during the financial year in the number of ordinary shares in Mirabela Nickel Limited held, directly,

indirectly or beneficially, by each KMP, including their related parties, is as follows:

Year ended

31 December 2014

Held at

1 January 2014 Purchases

Converted to

shares

Sales/

resignation

Held at

31 December 2014

Directors

Richard Newsted (1)

- - - - -

Maryse Belanger (2)

- - - - -

Ross Griffiths (3)

- 100,000 - - 100,000

Mark Milazzo (4)

- - - - -

Alastair McKeever (5)

- - - - -

Geoffrey Handley(6)

96,923 - - (96,923) -

Ian Purdy(7)

71,369 - - (71,369) -

Ian McCubbing(8)

193,846 - - (193,846) -

Peter Nicholson(9)

- - - - -

Colin Steyn(10)

50,972,345 - - (50,972,345) -

Nicholas Sheard(11)

100,000 - - (100,000) -

Executives

Dr. Linda Tompkins(12)

- - 2,150 (2,110)(16)

40

Milson Mundim(13)

- - - - -

Christiaan Els(14)

186,887 - - (186,887) -

Anthony Kocken (15)

- - - - -

51,621,370 100,000 2,150 (51,623,480) 100,040

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(1) Mr Newsted was appointed Chairman of the Board effective 25 June 2014. (2) Ms Belanger was appointed Executive Director and Chief Executive Officer of the Group effective 27 June 2014. (3) Mr Griffiths was appointed Non-executive Director effective 25 June 2014.

(4) Mr Milazzo was appointed Non-executive Director effective 25 June 2014.

(5) Mr McKeever was appointed Non-executive Director effective 6 August 2014.

(6) Mr Handley resigned from the Board effective 11 January 2014. (7) Mr Purdy resigned from the Board effective 5 May 2014 and resigned as Chief Executive Officer of the Group effective 31 May 2014. (8) Mr McCubbing resigned from the Board effective 7 April 2014. (9) Mr Nicholson resigned from the Board effective 11 January 2014. (10) Mr Steyn resigned from the Board effective 11 January 2014. (11) Mr Sheard resigned from the Board effective 7 April 2014. (12) Dr Tompkins was appointed Company Secretary effective 25 June 2014. (13) Mr Mundim was appointed Chief Financial Officer of the Group effective 8 September 2014. (14) Mr Els resigned as Company Secretary of the Group effective 19 May 2014 and ceased employment as Chief Financial Officer of the Group

effective 1 September 2014. (15) Mr Kocken ceased employment as Chief Operations Officer effective 25 August 2014. (16) As a result of the extinguishment on 25 June 2014 of the outstanding debt on the US$395.000 million 8.75% Senior Unsecured Notes due 15

April 2018 (Original Noteholders), the Original Noteholders became entitled to approximately 98.2% of the Company’s ordinary shares on issue at that time. As a result, the holdings of existing shareholders, including existing KMPs, were reduced accordingly to reflect the change in ownership.

Year ended

31 December 2013

Held at

1 January 2013 Purchases

Converted to

shares

Sales/

resignation

Held at

31 December 2013

Directors

Geoffrey Handley(1)

96,923 - - - 96,923

Ian Purdy(2)

350,860 - 70,509 (350,000) 71,369

Ian McCubbing(3)

193,846 - - - 193,846

Peter Nicholson(4)

- - - - -

Colin Steyn(5)

50,972,345 - - - 50,972,345

Nicholas Sheard(6)

- 100,000 - - 100,000

Executives

Christiaan Els(8)

216,041 - 20,846 (50,000) 186,887

Anthony Kocken - - - - -

William Bent(7)

- - 17,168 (17,168) -

51,830,015 100,000 108,523 (417,168) 51,621,370

(1) Mr Handley resigned from the Board effective 11 January 2014. (2) Mr Purdy resigned from the Board effective 5 May 2014 and resigned as Chief Executive Officer of the Group effective 31 May 2014. (3) Mr McCubbing resigned from the Board effective 7 April 2014. (4) Mr Nicholson resigned from the Board effective 11 January 2014. (5) Mr Steyn resigned from the Board effective 11 January 2014. (6) Mr Sheard resigned from the Board effective 7 April 2014 (7) Mr Bent resigned from the Company effective 31 January 2013. (8) Mr Els resigned as Company Secretary of the Group effective 19 May 2014 and ceased employment as Chief Financial Officer of the Group effective 1

September 2014.

3.7.3.5 Movement in options over ordinary shares held by key management personnel

31 December 2014:

There was no movement during the financial year ended 31 December 2014 in the number of options over ordinary

shares in the Company held directly, indirectly or beneficially by KMPs, including their related parties.

31 December 2013:

There was no movement during the financial year ended 31 December 2013 in the number of options over ordinary

shares in the Company held directly, indirectly or beneficially by KMPs, including their related parties

3.7.3.6 Options

During the year ended 31 December 2014 a total of 400,000 options previously issued at an exercise price of A$3.00

were unexercised and as a result have expired. There were no options outstanding as at 31 December 2014 (31

December 2013: 400,000).

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4 UNAUDITED NON-IFRS RECONCILIATION

EBITDA Reconciliation

The following table reflects a reconciliation of the Group’s EBITDA to the Consolidated Statement of Profit or Loss

and Other Comprehensive Income:

31 December 2014

31 December 2013

31 December 2012

31 December 2011

US$000 US$000 US$000 US$000

Profit/(Loss) for the period per Consolidated Statement of Profit or Loss and Other Comprehensive Income 382,945 (493,861) (452,875) (50,761)

Add back:

Income tax expense 8,791 - - -

Impairment of property, plant and equipment - 331,182 380,000 -

Depreciation, amortisation and depletion 651 20,375 64,765 52,829

Financial expense 35,024 54,098 43,431 38,843

Inventory valuation adjustments - 3,169 - -

Net foreign exchange loss - 48,318 9,868 -

Other expenses 33,199 16,214 6,687 12,324

Less:

Income tax benefit - - - (2,369)

Inventory valuation adjustments (732) - - -

Financial Income (1,327) (5,070) (6,549) (3,175)

Net derivative gain - - - (249)

Other income (502,220) (816) - -

Net foreign exchange gain (14,499) - - (32,827)

EBITDA (58,168) (26,391) 45,327 14,615

Production Unit Cash Costs Reconciliation

31 December 2014

31 December 2013

31 December 2012

31 December 2011

US$000 US$000 US$000 US$000

Gross loss per Consolidated Statement of

Comprehensive Income (30,763) (34,114) (6,757) (27,888)

Add back:

Royalties 9,229 8,837 14,978 15,617

Depreciation, amortization and depletion 651 20,375 64,765 52,829

Inventory valuation adjustments - 3,169 - -

Direct concentrate stockpile movement - - 6,326 -

Copper Hedge expense 2,886 6,013 1,373 844

Less:

Inventory valuation adjustments (732) - - -

Nickel sales revenue (121,489) (165,622) (300,550) (263,985)

Direct concentrate stockpile movement (14,400) (16,486) - (3,570)

Total cash operating cost of production 154,618 177,828 219,865 226,153

Payable nickel (pounds) 21,594,716 30,659,959 37,777,448 31,107,699

Unit Cash Cost (US$) per pound of payable nickel 7.16 5.80 5.82 7.27

The above reconciliations should be read in conjunction with Table 5 of the Remuneration Report (Section 3 of the

Directors’ Report).

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5 DIRECTORS’ INTERESTS

As at the date of this report, the interests of the directors in the shares and performance rights of Mirabela Nickel

Limited were:

Directors Ordinary shares Performance Rights Options

Richard Newsted - - -

Maryse Belanger - - -

Ross Griffiths 100,000 - -

Mark Milazzo - - -

Alastair McKeever - - -

6 PERFORMANCE RIGHTS / SHARE OPTIONS

6.1 Shares Issued on Exercise of Performance Rights and Options

During the financial year there was no performance rights converted to ordinary shares. No options were exercised

during or since the end of the financial year and consequently no ordinary shares were issued as a result.

6.2 Unissued Shares under Performance Rights

Unissued shares of the Company under performance rights are:

Vesting date

At

31 December 2014

At the date

of this report

31 December 2013(1)

482,263 482,263

Balance 482,263 482,263

(1) These performance rights were subject to a twelve month service conditon, but were suspended by the previous Committee on 10 January 2014.

6.3 Unissued Shares under Option


were unexercised and as a result have expired. There were no options outstanding as at 31 December 2014 (31

December 2013: 400,000)

7 INDEMNIFICATION AND INSURANCE OF OFFICERS

7.1 Indemnification

An indemnity agreement has been entered into with each of the directors and the Company Secretary of the

Company named earlier in this report. Under the agreements, the Company has agreed to indemnify those officers

against any claim or for any expense or cost which may arise as a result of work performed in their respective

capacities to the extent permitted by law. There is no monetary limit to the extent of this indemnity.

7.2 Insurance

During the financial year, the Company paid premiums on a contract of insurance covering directors or members of

senior management against liabilities incurred in respect of the relevant office, except as precluded by law.

The directors have not included details of the nature of liabilities covered or the amount of premium paid in respect

of the directors’ and officers’ liability and legal expenses insurance contracts, as such disclosure is prohibited under

the terms of the contract.

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8 PRINCIPAL ACTIVITIES

The Company is a Brazilian nickel producer engaged in the exploration, mining, production and sale of nickel

concentrate. The ordinary shares of the Company are listed on the Australian Securities Exchange under the symbol

“MBN”.

The Company’s principal asset is the 100% owned Santa Rita nickel sulphide mine in Bahia, Brazil, discovered by the

Company in 2004 and brought into commercial production in 2010.

9 AUDIT AND RISK COMMITTEE

The Audit and Risk Committee has a documented charter, approved by the Board. All members of the Audit and Risk

Committee in 2014 were Non-executive Directors. The Audit and Risk Committee advised on the establishment and

maintenance of a framework of internal control and appropriate ethical standards for the management of the

Group.

The members of the Audit and Risk Committee during the year ended 31 December 2014 were:

• Mr Ross Griffiths, Dip Bus Studies (Acc), FCA, MBA, GAICD – Non-executive Director; Chairman of the Audit and Risk

Committee (appointed 25 June 2014).

• Mr Richard Newsted, BSc (Accounting), M Bus Admin (Hons) - Non-executive Director (appointed 25 June 2014).

• Mr Mark Milazzo, B.Eng. Mining, FAusIMM - Non-executive Director (appointed 25 June 2014).

• Mr Ian McCubbing, B.Com (Hons), MBA (Ex), CA, GAICD - Non-executive Director; Chairman of the previous Audit

Committee (resigned effective 7 April 2014).

• Mr Nicholas Sheard, ASEG, Fellow AIG, RP.Geo – Non-executive Director; member of the previous Audit Committee

(resigned effective 7 April 2014)

• Mr Colin Steyn, B.Com, MBA – Non-executive Director; member of the previous Audit Committee (resigned 11 January

2014)

In 2014, the Audit and Risk Committee met once during the financial year and the Audit and Risk Committee

members’ attendance record is disclosed in the table of directors’ meetings in section 1.3 of this Directors’ Report.

During the period in 2014 that the Company was in voluntary administration, there was no Audit Committee nor

Audit and Risk Committee.

10 DIVIDENDS

No dividends have been paid or declared by the Company during the year ended 31 December 2014 (31 December

2013: Nil).

11 EARNINGS PER SHARE

The basic and diluted earnings per share for the Group for the period was US$0.42 per share (31 December 2013:

US$0.56 loss per share).

12 EVENTS SUBSEQUENT TO REPORTING DATE

Offtakes

Following repeated refusals by Norilsk Nickel Harjavalta Oy (Norilsk Nickel) to comply with its obligations under the

Santa Rita Project Concentrate Sales Agreement (Agreement) the Company formally terminated the Agreement on

24 February 2015. The Company is currently obtaining legal advice in relation to its right to recover any loss and

damage that may arise as a result of Norilsk Nickel’s repudiation of the Agreement.

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An offtake agreement has been entered into with an international trading house (ITH) on 30 January 2015 for

approximately 80% of the Group’s forecast range for 2015 nickel in concentrate production.

Mine Plan

The Board approved the Company’s new Mine and Business Plan for 2015 (the Mine Plan), as referred to in Note 2

of the consolidated financial statements, on 10 February 2015. The Mine Plan focuses on streamlining operations

and reducing production unit costs. The Mine Plan targets optimising near-term cash flows given the low and

volatile nickel price environment. Production levels to-date have improved in line with the Mine Plan.

13 CORPORATE STRUCTURE

Mirabela Nickel Limited is a company limited by shares that is incorporated and domiciled in Australia. As at 31

December 2014, the Company’s shares were in a trading halt. The Company had requested the ASX on 17 December

2014 to place its shares in a trading halt and was subsequently reinstated to official quotation on 16 February 2015.

14 NON-AUDIT SERVICES

The Board considered the non-audit services provided during the financial year by the auditor and was satisfied that

the provision of those non-audit services was compatible with, and did not compromise, the auditor’s independence

requirements of the Corporations Act 2001 (Cth).

All non-audit services provided during the financial year were subject to the corporate governance procedures

adopted by the Company and were reviewed by the previous and current Boards to ensure they did not impact the

integrity and objectivity of the auditor; and the non-audit services provided did not undermine the general principles

relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants, as they did not

involve reviewing or auditing the auditor’s own work, acting in a management or decision making capacity for the

Company, acting as an advocate for the Company or jointly sharing risks and rewards.

31 December 2014 31 December 2013

Note-consolidated

financial statements US$ US$

Auditors of the Company

KPMG Australia:

Audit fees 11 385,037 399,132

Other assurance and advisory services(a)

11 46,728 43,723

KPMG Brazil: Audit fees 11 125,443 103,374

Other assurance and advisory services(a)

11 29,199 37,801

586,407 584,030

(a) Other assurance and advisory services

These include advisory services relating to an investigating accountant’s report provided during the Company’s

recapitalisation (US$37,453), the ongoing hotline for the Whistleblower program in Brazil, along with general

accounting advisory support.

15 BUSINESS RISKS AND UNCERTAINTIES

There are a number of risks that may have a material and adverse impact on the future operating and financial performance of the Company. These include the risks discussed in Notes 2 and 3(e) of the consolidated financial statements, along with risks that are widespread and associated with any form of business and specific risks associated with the Company’s business and its involvement in the exploration and mining industry generally and in

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Brazil in particular. While most risk factors are largely beyond the control of the Company, the Company will seek to mitigate the risks where possible.

15.1 The Company’s Financial Condition

There can be no assurance that the Company will not continue to incur losses should it continue as a going concern

(note, the Company’s profit for the period of US$382.945 million includes debt forgiveness income US$439.715

million and fair value adjustments to the senior convertible secured note derivative of US$61.987 million).

Numerous factors, including declining metal prices, adverse currency exchange rate movements (in particular the

Brazilian Real and United States dollar), lower than expected ore grades or higher than expected operating costs and

impairment write-offs of mine property and/or exploration property costs, could cause the Company to continue to

be unprofitable in the future. Continued losses could have important consequences, including the following:

Limiting the Company’s ability to obtain additional financing to fund future working capital, capital expenditures,

operating and exploration costs and other general corporate requirements;

Requiring the Company to dedicate a significant portion of the Company’s cashflows to make debt service

payments, which would reduce its ability to fund working capital, capital expenditures, operating and exploration

costs and other general corporate requirements; and

Limiting the Company’s flexibility in planning for, or reacting to, changes in the business and the industry.

15.2 Decreases in the Price of Nickel

The price of nickel will affect the profitability of the Santa Rita Operation. The price of nickel fluctuates widely and is

affected by numerous factors beyond the control of the Company such as industrial and retail supply and demand,

exchange rates, inflation rate fluctuation, changes in global economies, confidence in the global monetary system,

forward sales of metals by producers and speculators as well as other global or regional political, social or economic

events. The supply of metals consists of a combination of new mine production and existing stocks held by

governments, producers, speculators and consumers.

Future production from the Company’s mining properties, including in particular the Santa Rita Operation, is

dependent upon the price of nickel being adequate to make it economically viable. The Company’s ore reserves have

been calculated at a price of US$8.00/lb.

Future price declines in the market value of nickel and copper could cause commercial production from the Santa

Rita Operation to be rendered uneconomic. Declining metal prices will also adversely affect the Company’s ability to

obtain financing both now and in the long term.

15.3 Production Estimates

The Company may not achieve its production estimates. The failure of the Company to achieve its production

estimates could have a material adverse effect on any or all of its future cash flows, profitability, results of operations

and financial conditions. The realisation of production estimates is dependent on, among other things, the accuracy

of mineral reserve and resource estimates including geologic interpretation, ore grades and recovery rates, ground

conditions (including hydrology), the physical characteristics of ores, the presence or absence of particular

metallurgical characteristics, and the accuracy of the estimated rates and costs of mining, ore haulage and processing.

Actual production may vary from estimates for a variety of reasons, including: the availability of certain types of ores;

the actual ore mined varying from estimates of grade or tonnage; dilution and metallurgical and other characteristics

(whether based on representative samples of ore or not); short-term operating factors such as the need for

sequential development of ore bodies and the processing of new or adjacent ore grades from those planned; mine

failures, slope failures or equipment failures; industrial accidents; natural phenomena such as inclement weather

conditions, floods, droughts, rock slides and earthquakes; encountering unusual or unexpected geological conditions;

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changes in power costs and potential power shortages; shortages of principal supplies needed for mining operations,

including explosives, fuels, chemical reagents, water, equipment parts and lubricants; plant and equipment failure;

the inability to process certain types of ores; labour shortages or strikes; lack of required labour; civil disobedience

and protests; and restrictions or regulations imposed by government agencies or other changes in the regulatory

environment.

Such occurrences could also result in damage to mineral properties or mines, interruptions in production, injury or

death to persons, damage to property of the Company or others, monetary losses and legal liabilities in addition to

adversely affecting mineral production. These factors may cause a mineral deposit that has been mined profitably in

the past to become unprofitable forcing the Company to cease production.

15.4 Cost Estimates

The Company provides forecasts of its C1 unit cash costs. The Company may not achieve such cost estimates, which

could have a material adverse effect on its profitability, results of operations and financial condition. Operating costs

are estimated based on the interpretation of geological data and recent costs achieved broken down by activity in

operations. Any of the following events could affect the ultimate accuracy of such estimate and result in an increase

in actual operating costs incurred: (i) unanticipated changes in grade and tonnage of ore to be mined and processed;

(ii) incorrect data on which engineering assumptions are made; (iii) equipment delays; (iv) labour disputes and

negotiations; (v) changes in government regulation including regulations regarding prices, cost of consumables,

royalties, duties, taxes, permitting and restrictions on production quotas on exportation of minerals; and (vi) title

claims. Material increases in operating costs at the Santa Rita Operation could cause the Company to suspend

operation of the Santa Rita Operation as currently planned, either temporarily or permanently.

15.5 Ore Reserves and Mineral Resources Estimates

The estimated costs of the Santa Rita mining operation, the tonnages and grades anticipated to be achieved and the

anticipated level of recovery are based on the Company’s estimated ore reserves and mineral resources for the

Santa Rita mine. No assurance can be given that the anticipated tonnages and grades will be achieved, that

anticipated level of recovery will be realised or that ore reserves will be mined or processed profitably. There are

numerous uncertainties inherent in estimating ore reserves and mineral resources, including many factors beyond

the Company’s control. Such estimation is a subjective process, and the accuracy of any ore reserve or resource

estimate is a function of the quantity and quality of available data and of the assumptions made and judgements

used in engineering and geological interpretation. Short term operating factors relating to the ore reserves, such as

the need for the orderly development of ore bodies or the processing of new or different ore grades, may cause

mining operations to be unprofitable in any particular accounting period.

Fluctuations in nickel prices, results of drilling, metallurgical testing and production and the evaluation of mine plans

subsequent to the date of any estimate of ore reserves or mineral resources may require revisions to such estimates.

As a result, the volume and grade of ore reserves the Company mines and processes, the recovery rate it achieves

and the cost of its operations may not be the same as currently anticipated. Any material reductions in the

Company’s estimated ore reserves and mineral resources, or of its ability to extract these ore reserves, could have a

material adverse effect on the Company’s results of operations and financial condition.

15.6 Foreign Exchange Risk

Exchange rate fluctuations affect the Company’s costs, revenue and cashflows. Although the Company’s

indebtedness is denominated in United States dollars, the majority of the Company’s operating expenses and capital

expenditures are incurred in Brazilian real, with some smaller costs denominated in Australian dollars. Further,

nickel is sold worldwide, predominantly in United States dollars.

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Accordingly, adverse fluctuations in the relative price of the Brazilian real and the Australian and United States

dollars would effectively increase the costs of development and production at the Santa Rita mine and could

materially and adversely affect the Company’s earnings and financial condition.

15.7 Delays in Procuring New Equipment

Delays in procuring new equipment, or maintaining and supporting existing equipment may impact the Company’s

ability to achieve its production forecasts. Equipment delays may result from difficulties in procurement, funding

constraints the Company may face, late ordering of equipment, shipping and customs delays, or fabrication, drilling,

blasting and loading problems. Additionally, excessive wear on equipment could create the need for unexpected

repairs or new equipment or spares, creating further delays and increasing operating costs.

Supply shortages may also result from an excess of demand over supply for mining equipment and competition for

supplies from competitors. If the Company is unable to secure sufficient supplies for its operations, it may suffer

reductions in its production capacity, which could have a material adverse effect on its financial and operating

results.

15.8 Concentrate Specifications

The Company’s concentrate is subject to risks of process upsets and equipment malfunctions. Head grade, mill

throughput, or anticipated metallurgical recoveries may ultimately be lower than expected. Concentrate produced

by the Company is subject to offtake agreements and must meet certain specifications. Failure to meet such

specifications could entitle purchasers to refuse delivery or seek price adjustments, which in either case, could have

a material adverse effect on the Company’s revenue, cash flows and financial condition.

15.9 Environmental Risks and Regulations

All phases of the Company’s operations are subject to environmental regulation in the jurisdictions in which it

operates. These regulations mandate, among other things, the maintenance of air and water quality standards and

land reclamation. They also set limitations on the generation, transportation, storage and disposal of solid and

hazardous waste. Environmental legislation is evolving in a manner which will require stricter standards and

enforcement, increased fines and penalties for non-compliance, more stringent environmental assessments of

proposed projects, and a heightened degree of responsibility for companies and their officers, directors and

employees. There is no assurance that future changes in environmental regulation, if any, will not adversely affect

the Company’s operations. Environmental hazards may exist on the properties on which the Company holds

interests which are unknown to the Company at present and which have been caused by previous or existing owners

or operators of the properties.

Government approvals and permits are current and may in the future be required in connection with the operations

of the Company. To the extent such approvals are required and not obtained, the Company may be curtailed or

prohibited from continuing its mining operations or from proceeding with planned exploration or development of

mineral properties or sale of concentrate.

Failure to comply with applicable laws, regulations and permitting requirements may result in enforcement actions

there under, including orders issued by regulatory or judicial authorities causing operations to cease or be curtailed,

and may include corrective measures requiring capital expenditures, installation of additional equipment, or

remedial actions. Parties engaged in mining operations or in the exploration or development of mineral properties

or the sale of concentrate may be required to compensate those suffering loss or damage by reason of the mining

activities and may have civil or criminal fines or penalties imposed for violations of applicable laws or regulations.

Amendments to current laws, regulations and permits governing operations and activities of mining and exploration

companies, or more stringent implementation thereof, could have a material adverse impact on the Company and

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cause increases in exploration expenses, capital expenditures or production costs, or reduction in levels of

production, or require abandonment or delays in development of new mining properties.

15.10 Tailings Dam

The tailings dam wall capital works are ongoing; however, should issues arise with the lifting of the dam wall height,

to accommodate additional solids and waste water from the processing plant, then this may have a material adverse

impact on production and/or the economic viability of the mine.

15.11 Operating Licence

Mirabela Brazil holds an operating licence for the Santa Rita mine, issued by the Bahia State Environmental Board

(INEMA). This licence was issued in September 2009 for a period of four years. Mirabela Brazil has applied for a

renewal of the licence. The current licence has been automatically extended until INEMA finalises its review. The

Company has no reason to consider the renewal will not be granted, but there is no guarantee the operating licence

will be granted and what new conditions will apply.

15.12 Mining Tenements

The mining concession for the Santa Rita mine is held by Companhia Baiana De Pesquisa Mineral (CBPM). Mirabela

Brazil’s mining rights are subject to a 20 year mining lease agreement with CBPM which commenced in March 2008.

The mining lease agreement can be extended through agreement with CBPM which may be at risk of termination if

Mirabela Brazil filed for bankruptcy.

15.13 Brazilian indirect taxes

As a result of the concentrate sales shift from Votorantim Metais S.A. (Votorantim) to an international trading

house, certain Brazilian state input tax credits that were previously available to Mirabela Brazil are not available

going forward. These credits can only be claimed where there are corresponding domestic sales, or offset against

certain tax liabilities or sold to third parties under specific conditions requiring approval from the Bahia state

authority

16 ROUNDING

The Company is of a kind referred to in ASIC Class Order 98/100 dated 10 July 1998 and in accordance with that Class

Order, amounts in the financial report and the Directors’ Report have been rounded off to the nearest thousand

dollars, unless otherwise stated.

17 LEAD AUDITOR’S INDEPENDENCE DECLARATION

The Lead Auditor’s Independence Declaration is set out on page 46 and forms part of the Directors’ Report for the

financial year ended 31 December 2014.

Dated at Perth this 26th

day of March 2015.

Signed in accordance with a resolution of the directors.

Richard Newsted Maryse Belanger Non-executive Chairman Chief Executive Officer

& Managing Director

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DIRECTORS’ DECLARATION

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1 In the opinion of the directors of Mirabela Nickel Limited (the Company):

(a) The consolidated financial statements and notes that are set out on pages 47 to 102, and the Remuneration

Report in Section 3 of the Directors’ Report, are in accordance with the Corporations Act 2001, including:

(i) giving a true and fair view of the Group’s financial position as at 31 December 2014 and of its

performance, for the financial year ended on that date; and

(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; and

(b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they

become due and payable;

2 The directors have been given the declarations required by Section 295A of the Corporations Act 2001 by the

Chief Executive Officer and Chief Financial Officer for the financial year ended 31 December 2014.

3 The directors draw attention to Note 3(a) to the consolidated financial statements, which includes a statement of

compliance with International Financial Reporting Standards.

4 The directors also draw attention to Notes 2 and 3(e) of the consolidated financial statements, which make

reference to the going concern basis of preparation.

Dated at Perth this 26th

day of March 2015.

Signed in accordance with a resolution of the directors.

Richard Newsted Maryse Belanger Non-executive Chairman Chief Executive Officer

& Managing Director

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INDEPENDENT AUDITOR’S REPORT

44

Independent auditor’s report to the members of Mirabela Nickel Limited

Report on the financial report

We have audited the accompanying financial report of Mirabela Nickel Limited (the Company), which comprises the consolidated statement of financial position as at 31 December 2014, and consolidated statement of profit and loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year ended on that date, notes 1 to 35 comprising a summary of significant accounting policies and other explanatory information and the directors’ declaration of the Group comprising the Company and the entities it controlled at the year’s end or from time to time during the financial year.

Directors’ responsibility for the financial report

The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that is free from material misstatement whether due to fraud or error. In note 3(a), the directors also state, in accordance with Australian Accounting Standard AASB 101 Presentation of Financial Statements, that the financial statements of the Group comply with International Financial Reporting Standards.

Auditor’s responsibility

Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of the financial report that gives a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report.

We performed the procedures to assess whether in all material respects the financial report presents fairly, in accordance with the Corporations Act 2001 and Australian Accounting Standards, a true and fair view which is consistent with our understanding of the Group’s financial position and of its performance.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. F

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INDEPENDENT AUDITOR’S REPORT

45

Independence

In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001.

Auditor’s opinion

In our opinion:

(a) the financial report of the Group is in accordance with the Corporations Act 2001, including:

(i) giving a true and fair view of the Group’s financial position as at 31 December 2014 and of its performance for the year ended on that date; and

(ii) complying with Australian Accounting Standards and the Corporations Regulation 2001.

(b) the financial report also complies with International Financial Reporting Standards as disclosed in note 3(a).

Material uncertainty regarding continuation as a going concern

Without modifying our opinion expressed above, attention is drawn to note 3(e) to the financial report. The matters set forth in note 3(e) indicate the existence of a material uncertainty that may cast significant doubt on the Group’s ability to continue as a going concern and therefore, the Group may be unable to realise its assets and discharge its liabilities in the normal course of business and at the amounts stated in the financial report.

Report on the remuneration report

We have audited the Remuneration Report included in section 3 of the directors’ report for the year ended 31 December 2014. The directors of the Company are responsible for the preparation and presentation of the remuneration report in accordance with Section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with auditing standards.

Auditor’s opinion

In our opinion, the Remuneration Report of Mirabela Nickel Limited for the year ended 31 December 2014, complies with Section 300A of the Corporations Act 2001.

KPMG

R Gambitta Partner

Perth

26 March 2015

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LEAD AUDITOR’S INDEPENDENCE DECLARATION

46

Lead Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001

To: the directors of Mirabela Nickel Limited

I declare that, to the best of my knowledge and belief, in relation to the audit for the financial year ended 31 December 2014 there have been:

(i) no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and

(ii) no contraventions of any applicable code of professional conduct in relation to the audit.

KPMG

R Gambitta Partner

Perth

26 March 2015

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CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

For the year ended 31 December 2014

47

31 December

2014

31 December

2013

Note US$000 US$000

Sales revenue 7 137,677 194,180

Treatment, refining and transport charges (35,237) (40,884)

Net sales revenue 102,440 153,296

Direct costs (123,323) (158,198)

Royalties (9,229) (8,837)

Depreciation, amortisation and depletion (651) (20,375)

Cost of sales (133,203) (187,410)

Gross loss (30,763) (34,114)

Income/(Expenses)

Impairment of property, plant and equipment 21 - (331,182)

General and administration 10 (27,324) (15,821)

Financial income 8 1,327 5,070

Financial expense 8 (35,024) (54,098)

Net foreign exchange gain/(loss) 14,499 (48,318)

Other Income 9 502,220 816

Other expenses 9 (33,199) (16,214)

422,499 (459,747)

Profit/(Loss) before income tax 391,736 (493,861)

Income tax expense 14 (8,791) -

Profit/(Loss) for the period 382,945 (493,861)

OTHER COMPREHENSIVE (EXPENSE) /INCOME

Items that may be reclassified subsequently to profit or loss:

Foreign currency translation differences (28,486) (10,336) Net change in fair value of cash flow hedges transferred to profit or loss 4,740 9,663

Other comprehensive expense for the period (23,746) (673)

Total comprehensive expense for the period 359,199 (494,534)

EARNINGS (LOSS) PER SHARE

Basic earnings (loss) per share ($ per share) 15 0.42 (0.56)

Diluted earnings (loss) per share ($ per share) 15 0.31 (0.56)

The consolidated statement of profit or loss and other comprehensive income is to be read in conjunction with the notes to the

consolidated financial statements set out on pages 52 to 102. For

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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY


48

Attributable to equity holders of the Group

Issued

capital

Translation

reserve

Share based

payments

reserve

Hedging

reserve

Accumulated

losses

Total

equity

31 December 2014 Note US$000 US$000 US$000 US$000 US$000 US$000

Balance at 1 January 2014

796,517 (125,715) 5,590 (4,740) (1,047,470) (375,818)

TOTAL COMPREHENSIVE

INCOME/ (EXPENSE) FOR THE YEAR

Profit for the year - - - - 382,945 382,945

Other comprehensive income/

(expense)

Foreign currency translation

differences

28 - (28,486) - - - (28,486)

Net change in fair value of cash

flow hedges transferred to profit

or loss 19 - - - 4,740 - 4,740 Total other comprehensive

(expense)/ income

- (28,486) - 4,740 - (23,746)

Total comprehensive

(expense)/income for the year

- (28,486) - 4,740 382,945 359,199

TRANSACTIONS WITH EQUITY

HOLDERS

Share issue during the period 27 7,296 - - - - 7,296

Share based payments cancelled

during the period

28 - - (328) - 328 -

Share based payments recognised 28 - - 328 - - 328

Total transactions with equity

holders

7,296 - - - 328 7,624

Balance at 31 December 2014

803,813 (154,201) 5,590 - (664,197) (8,995)

The consolidated statement of changes in equity is to be read in conjunction with the notes to the consolidated financial statements set out on pages 52 to 102.

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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY


49

Attributable to equity holders of the Group

Issued

capital

Translation

reserve

Share based

payments

reserve

Hedging

reserve

Accumulated

losses

Total

equity

31 December 2013 Note US$000 US$000 US$000 US$000 US$000 US$000

Balance at 1 January 2013

797,110 (115,379) 7,186 (14,403) (555,825) 118,689

TOTAL COMPREHENSIVE

INCOME/ (EXPENSE) FOR THE YEAR

Loss for the year - - - - (493,861) (493,861)

Other comprehensive income/

(expense)

Foreign currency translation

differences

28 - (10,336) - - - (10,336)

Net change in fair value of cash

flow hedges transferred to profit

or loss 19 - - - 9,663 - 9,663 Total other comprehensive

(expense)/ income

- (10,336) - 9,663 - (673)

Total comprehensive

(expense)/income for the year

- (10,336) - 9,663 (493,861) (494,534)

TRANSACTIONS WITH EQUITY

HOLDERS

Share issue costs 27 (593) - - - - (593)

Options lapsed during the period 28 - - (1,704) - 1,704 -

Shares transferred to retained

losses due to cancellation

28 - - (512) - 512 -

Share based payments recognised 28 - - 620 - - 620

Total transactions with equity

holders

(593) - (1,596) - 2,216 27

Balance at 31 December 2013

796,517 (125,715) 5,590 (4,740) (1,047,470) (375,818)

The consolidated statement of changes in equity is to be read in conjunction with the notes to the consolidated financial statements set out on pages 52 to 102.

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CONSOLIDATED STATEMENT OF FINANCIAL POSITION


50

The consolidated statement of financial position is to be read in conjunction with the notes to the consolidated financial statements set out on pages 52 to 102.

31 December

2014

31 December

2013

Note US$000 US$000

ASSETS

Cash and cash equivalents 16 17,560 30,735

Trade and other receivables 17 5,865 25,223

Inventories 18 55,893 67,970

Total current assets 79,318 123,928

Trade and other receivables 17 34,645 31,951

Property, plant and equipment 21 36,859 -

Exploration and evaluation assets 20 2,363 2,663

Total non-current assets 73,867 34,614

Total assets 153,185 158,542

LIABILITIES

Trade and other payables 22 33,388 64,483

Provisions 23 2,028 3,392

Borrowings 24 1,996 456,241

Total current liabilities 37,412 524,116

Provisions 23 13,234 10,244

Borrowings 24 95,822 -

Convertible note derivative 25 6,921 -

Deferred tax liability 14 8,791 -

Total non-current liabilities 124,768 10,244

Total liabilities 162,180 534,360

Net liabilities (8,995) (375,818)

EQUITY

Contributed equity 27 803,813 796,517

Reserves 28 (148,611) (124,865)

Accumulated losses (664,197) (1,047,470)

Total deficiency (8,995) (375,818)

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CONSOLIDATED STATEMENT OF CASH FLOWS


51

31 December

2014

31 December

2013

Note US$000 US$000

CASH FLOWS FROM OPERATING ACTIVITIES

Cash receipts from customers

136,336 212,452

Cash paid to suppliers and employees

(187,961) (250,556)

Interest received

1,327 5,070

Net cash used in operating activities 32 (50,298) (33,034)

CASH FLOWS FROM INVESTING ACTIVITIES

Acquisition of property, plant and equipment 21 (43,874) (36,609)

Net cash used in investing activities

(43,874) (36,609)

CASH FLOWS FROM FINANCING ACTIVITIES

Share issue costs 27 - (593)

Proceeds from borrowings

100,000 -

Repayment of borrowings (12,275) (9,631)

Interest paid (4,047) (21,431)

Net cash from/(used in) financing activities

83,678 (31,655)

Net decrease in cash and cash equivalents

(10,494) (101,298)

Cash and cash equivalents at the beginning of the period

30,735 143,007

Effect of changes in foreign currency

(2,681) (10,974)

Cash and cash equivalents at end of the year 16 17,560 30,735

The consolidated statement of cash flows is to be read in conjunction with the notes to the consolidated financial statements set out on pages 52 to 102.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


52

1. REPORTING ENTITY

The Company is domiciled in Australia. The address of the Company’s registered office is Level 21, Allendale Square,

77 St Georges Terrace, Perth WA 6000. The consolidated financial statements of the Company for the year ended 31

December 2014 comprise the Company and its subsidiaries (together referred to as the ‘Group’). The Group is a for-

profit entity primarily involved in the production, development and exploration of mineral properties in Brazil.

2. STATUS OF OPERATIONS AND GOING CONCERN

The Group is engaged in the mining, production and sale of nickel concentrate. Its principal asset is the 100% owned

Santa Rita nickel sulphide, open pit operation in Bahia State, Brazil. The Santa Rita operation produces metal

concentrate via a nickel flotation processing plant and is supported by an open pit with a current life of mine of 14

years based on remaining reserves (including 2015). The Group also has a number of near-mine and regional

exploration prospects.

The Company notes the challenging nickel market conditions based on current LME nickel prices.

As announced on 25 June 2014, the Company successfully completed its restructure when the Deed of Company

Arrangement (DOCA) was fully effectuated, the Deed Administrators retired, the DOCA terminated and the day-to-

day management of the Company reverted to the Company’s directors.

The various restructure events were as follows:

The Senior Unsecured Noteholder debt of US$395.000 million 8.75% Senior Unsecured Notes due 15 April 2018

(Original Noteholders) and incurred interest were extinguished on 25 June 2014, and in return the Original

Noteholders became entitled to approximately 98.2% of the Company’s ordinary shares on issue at that time

(DOCA Shares). The DOCA Shares were transferred from existing shareholders of the Company (by order of the

Supreme Court of New South Wales) to a trustee who holds them as bare trustee (Mirabela Investments Pty Ltd)

for the Original Noteholders.

The US$115.000 million 9.50% Senior Convertible Secured Notes (SCSN) due 24 June 2019 were issued on 24

June 2014 (further details regarding the SCSNs is contained in Note 24):

The SCSNs are convertible into Mirabela ordinary shares at the discretion of the SCSN Holders up to the

maturity date of 24 June 2019. No SCSNs were converted into Mirabela ordinary shares as at 31 December

2014; and

Mirabela has the option to redeem the SCSNs on or after the third anniversary of the issuance of the SCSNs,

based on specified terms.

US$5.000 million of 1.00% Subordinated Unsecured Notes due 2044 were issued to all former Noteholders on

10 September 2014.

Arbitration proceedings under the rules of the Center for Arbitration and mediation CCBC, São Paulo, Brazil, between

Mirabela Brazil and Votorantim Metais S.A. (Votorantim) are continuing and have now entered the proof and

evidence stage. The arbitration proceeding is in relation to the validity of the alleged force majeure claimed by

Votorantim and the obligations of Votorantim under its off-take agreement with Mirabela Brazil. Mirabela Brazil is

also requesting compensation for loss.

Also, following repeated refusals by Norilsk Nickel Harjavalta Oy (Norilsk Nickel) to comply with its obligations under

the Santa Rita Project Concentrate Sales Agreement (Agreement) the Company formally terminated the Agreement

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on 24 February 2015. The Company is currently obtaining legal advice in relation to its right to recover any loss and


The new Board and Chief Executive Officer/Managing Director, having been appointed post 25 June 2014, have

focussed the second half of the 2014 financial year on returning the operation to normalised production levels, re-

assessing capital requirements and cost base to prepare the Company for 2015, as well as progressing the

Votorantim arbitration matter noted above and the Norilsk Nickel contract termination.

Mirabela has entered into off-take arrangements for approximately 80% of its forecast range for 2015 nickel

concentrate production, with further buyer’s options for additional volume. As part of its concentrate inventory

management, Mirabela is also in advanced discussions for the sale of its remaining uncontracted nickel concentrate

production for 2015 or should the buyer’s options not be exercised. Negotiations with various parties are also well

advanced for the sale and purchase of Santa Rita nickel concentrate after 2015.

Mirabela Brazil holds an operating licence for the Santa Rita mine, issued by the Bahia State Environmental Board

(INEMA). This licence was issued in September 2009 for a period of four years. Mirabela Brazil has applied for a

renewal of the licence. The current licence has been automatically extended until INEMA finalises its review. The

Company has no reason to consider the renewal will not be granted, but there is no guarantee the operating licence

will be granted and what new conditions will apply.

Also previously announced to the market, during the latter half of 2014 the management team undertook a strategic

review of the Santa Rita mine operations with the aim of completing a new business plan for 2015. The review

involved:

completing a new mineral resource model;

developing a new mine plan including an optimized pit sequence and new phases design for the next four years

of production;

developing new cut-off grade and stockpile strategies;

a review of metallurgical recoveries and its key drivers;

the development of new recovery function by ore type;

modifying operating conditions for the primary crusher;

improving process control procedures in the plant;

changes in tailings dam management and tailings deposition; and

costs structure and personnel review.

The above changes provide management with more effective operating conditions and flexibility at the mine site.

The Company achieved increased nickel production and lower C1 cash costs during the fourth quarter of 2014 as

compared to the third quarter of 2014. The first month in 2015 also saw sustained nickel in concentrate production

figures against planned production.

Mirabela’s 2015 mine plan focuses on streamlining operations and reducing production unit costs. The mine plan

targets optimising near-term cash flows given the low and volatile nickel price environment. The mine plan has

built-in flexibility and can be modified at the appropriate time when nickel prices demonstrate a sustained recovery.

As part of the overall strategic review of the Mirabela mining operations, the Company undertook a complete review

of the Santa Rita Ore Reserves and Mineral Resources. The review was possible as there is sufficient and meaningful

operational data to support reconciliation with previously used assumptions and parameters. The updated Ore

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Reserves reduce the projected mine life from 19 years to 14 years because the final phase of the previous ultimate

pit and lower-grade mineralized material will not be mined or processed under current assumptions. Specifically,

the higher strip ratio and lower-grade material require higher nickel prices to be economically processed and,

therefore, have been re-classified as Mineral Resources.

The Board’s assessment that the going concern basis of preparation is appropriate for the next 12 months is based

on the cash flow forecasts and sensitivities performed by the Company. The Board is relying on the approved new

mine plan and should one or more of the key assumptions contained in that new mine plan as commented on above

particularly the realised nickel price and production assumptions, not be achieved, there may be material

uncertainty that could give rise to significant doubt about the ability of the Group to realise its assets and settle its

obligations in an orderly manner over the period required and at the amounts stated in the financial report.

Reference should also be made to Note 3(e) in terms of the going concern basis of preparation.

3. BASIS OF PREPARATION

(a) Statement of compliance

This consolidated financial report is a general purpose financial report which has been prepared in accordance with

Australian Accounting Standards (AASBs) (including Australian Interpretations) adopted by the Australian Accounting

Standards Board (AASB) and the Corporations Act 2001 (Cth). The consolidated financial report of the Group and

Company complies with International Financial Reporting Standards (IFRSs) and interpretations adopted by the

International Accounting Standards Board (IASB). The consolidated financial statements for the year ended 31

December 2014 have been prepared on a going concern basis. The comparative disclosures for 31 December 2013

were prepared on a non-going concern basis.

The consolidated financial report was approved by the Board of Directors on 26 March 2015.

(b) Basis of measurement

The consolidated financial statements have been prepared on the historical cost basis except for the following:

• derivative financial instruments are measured at fair value; and

• share based payment arrangements are measured at fair value.

The methods used to measure fair values are discussed further in Note 5.

(c) Functional and presentation currency

The consolidated financial report is presented in US dollars, which is the Group’s presentation currency. The

Company’s functional currency is Australian dollars and the functional currency of the Company’s foreign subsidiary

is Brazilian real. The functional currency of each of the Group’s entities is measured using the currency of the

primary economic environment in which that entity operates.

The Group is of a kind referred to in ASIC Class Order 98/100 dated 10 July 1998 and in accordance with that Class

Order, amounts in the financial report have been rounded off to the nearest thousand dollars, unless otherwise

stated.

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(d) Use of estimates and judgements

The preparation of financial statements requires management to make judgements, estimates and assumptions that

affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses.

Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis and are based on historical experience and

various other factors that are believed to be reasonable under the current circumstances. Revisions to accounting

estimates are recognised in the period in which the estimate is revised and in any future periods affected.

The going concern basis of accounting relies on such estimates and assumptions and the comments as outlined in

Note 2 and Note 3(e) should be read in conjunction with this note.

In particular, information about significant areas of estimation uncertainty and critical judgements in applying

accounting policies that have the most significant effect on the amount recognised in the financial statements are

described in the following notes:

• Note 4(i) – revenue

• Note 14 – income tax expense

• Note 21 – property, plant and equipment

• Note 23 – provisions

• Note 29 – financial instruments

A significant area of estimation and judgement relevant to current and future reporting periods is as follows:

(i) Convertible note derivative

An option pricing model is used to calculate the fair value of the convertible note derivative that is dependent upon a number of estimates and assumptions. The types of estimates and assumptions used are set out in Note 5(i). Changes to the estimates and assumptions used in the pricing model could have a material impact on the fair value of the convertible note derivative.

(e) Financial position and going concern basis of preparation

The Group ended the year with cash on hand and on deposit of US$17.560 million (2013: $30.735 million). Cash was

positively impacted during the year by proceeds from the issue of SCSNs of US$55.000 million, and proceeds of

US$45.000 million under the terms of the Syndicated Note Subscription Deed provided by the Ad-hoc Group of

Senior Unsecured Noteholders. This was offset by cash outflows from the operations along with the capital

expenditure program to expand the tailings dam facility.

The Group generated a profit of US$382.945 million for the year ended 31 December 2014, which was primarily

attributable to the debt forgiveness of the Original Noteholder debt of US$439.715 million, fair value adjustments to

the convertible note option of US$61.987 million, and net foreign exchange gains of US$14.499 million; offset by

gross losses (US$30.763 million), net financing costs (US$33.697 million), general administration expenses

(US$27.324 million), and other expenses (US$33.199 million). Net financing costs mainly comprise of net interest

expense relating to the current debts along with the original Senior Unsecured Notes up to the date of forgiveness.

Foreign exchange losses comprise of realised and unrealised movements on the conversion of non-USD cash held

and borrowings. As a result of this, the Group’s net liability position as at 31 December 2014 has reduced to

US$8.995 million, as the Original Noteholder debt was derecognised and new unsecured notes issued. Net cash

outflows from operating and investing activities for the year ended 31 December 2014 were US$94.172 million.

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As outlined in Note 2, the Company recently effectuated the DOCA and exited from voluntary administration. The

Board and management are focussing on assessing key business requirements to ensure the Group’s ability to realise

its assets and settle its obligations in an orderly manner.

The Board has completed its strategic review of the business model for the Santa Rita operations, including its

approach to executing mining and production activities. The review involved a number of initiatives to provide Santa

Rita with more effective operating and flexibility at the mine site. This has resulted in an approved mine and

business plan for 2015. The 2015 mine plan focuses on streamlining operations and reducing production unit costs.

The mine plan targets optimising near-term cash flows given the low and volatile nickel price environment.

Production levels to-date have improved in line with the mine and business plan. This modelling has been updated

for projected nickel prices, foreign exchange and capital expenditure assumptions.

Mirabela has entered into off-take arrangements for approximately 80% of its forecast range for 2015 nickel

concentrate production, with further buyer’s options for additional volume. As part of its concentrate inventory

management, Mirabela is also in advanced discussions for the sale of its remaining uncontracted nickel concentrate

production for 2015 or should the buyer’s options not be exercised. Negotiations with various parties are also well

advanced for the sale and purchase of Santa Rita nickel concentrate after 2015.

The Board’s assessment that the going concern basis of preparation is appropriate for the next 12 months is based

on the cash flow forecasts and sensitivities performed by the Company. The forecasts used are dependent on the

achievement of production in accordance with the new approved mine plan, commercial pricing, along with the

stability of the nickel prices and foreign exchange rates to consensus views. Should the operations not successfully

achieve forecast production, commercial prices, forecast nickel prices and foreign exchange assumptions not be

achieved, the Group will be required to source additional funds through debt or equity markets or a combination of

both or a sell-down of assets.

The Board is relying on the new mine plan that was recently approved. Should one or more of the key assumptions

contained in that new mine plan as summarised in Note 2, particularly the realised nickel price and production

assumptions, not be achieved, there may be material uncertainty that could give rise to significant doubt about the

ability of the Group to realise its assets and settle its obligations in an orderly manner over the period required and

at the amounts stated in the financial report.

4. SIGNIFICANT ACCOUNTING POLICIES

The accounting policies set out below have been applied consistently to all periods presented in these consolidated

financial statements and have been applied consistently by the Group.

(a) Basis of consolidation

(i) Subsidiaries

Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights

to, variable returns from its involvement with the entity and has the ability to affect those returns through its power

over the entity. The financial statements of subsidiaries are included in the consolidated financial statements from

the date on which control commences until the date on which control ceases.

(ii) Transactions eliminated on consolidation

Intra-group balances, and any unrealised gains and losses or income and expenses arising from intra-group

transactions, are eliminated in preparing the consolidated financial statements.

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(b) Foreign currency

(i) Foreign currency transactions

Transactions denominated in foreign currencies are recorded using the exchange rate ruling at the date of the

underlying transaction. Monetary assets and liabilities denominated in foreign currencies are translated using the

rate of exchange ruling at year end and the gains or losses on retranslation are included in the consolidated

statement of profit or loss and other comprehensive income. Non-monetary assets and liabilities that are measured

in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction.

Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated at

foreign exchange rates ruling at the dates the fair value was determined.

(ii) Foreign operations

Foreign operations’ statement of profit or loss and other comprehensive income items are translated at the

approximate average exchange rate for the month. Assets and liabilities are translated at exchange rates prevailing

at the reporting date. Exchange variations resulting from the retranslation at closing rate of the net investment in a

foreign operation, together with differences between their statement of profit or loss and other comprehensive

income items translated at actual and closing rates, are disclosed in the foreign currency translation reserve and

recognised in other comprehensive income and expense.

(c) Financial instruments

(i) Convertible note liability and derivative

Convertible notes issued by the Company comprise convertible notes that can be converted to share capital at the

option of the holder and a convertible note derivative whose fair value changes with the Company’s underlying

share price and the USD:AUD exchange rate.

The liability component of a convertible note is recognised initially at the fair value of a similar liability that does not

have an equity conversion option, and is calculated as the difference between the financial instrument as a whole

and the value of the derivative at inception. The embedded derivative component is recognised initially at fair value.

Any directly attributable transaction costs are allocated to the convertible note liability. The fair value of the

derivative portion has been valued using a valuation technique including inputs that include reference to similar

instruments and option pricing models. Subsequent to recognition, the liability component of the convertible note is

measured at amortised cost using the effective interest method. The convertible note derivative is measured at fair

value through profit or loss.

The convertible note liability and derivative are derecognised from the statement of financial position when the

obligations specified in the contract are discharged. This can occur upon the note holder exercising their option or

the option period lapses requiring the Company to repay the obligation.

(ii) Non-derivative financial instruments

Non-derivative financial instruments comprise investments in equity and debt securities, trade and other

receivables, cash and cash equivalents, loans and borrowings, and trade and other payables.

Non-derivative financial instruments are recognised initially at fair value. For instruments not valued at fair value

any directly attributable transaction costs will go through profit or loss, except as described below. Subsequent to

initial recognition, non-derivative financial instruments are measured as described below.

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A financial instrument is recognised if the Group becomes a party to the contractual provisions of the instrument.

Financial assets are derecognised if the Group’s contractual rights to the cash flows from the financial assets expire

or if the Group transfers the financial asset to another party without retaining control or substantially all risks and

rewards of the asset. Regular way purchases and sales of financial assets are accounted for at trade date, i.e., the

date that the Group commits itself to purchase or sell the asset. Financial liabilities are derecognised if the Group’s

obligations specified in the contract expire, are discharged or cancelled.

Accounting for finance income and expense is discussed in Note 4(q).

(iii) Other derivative financial instruments

The Group may hold from time-to-time derivative financial instruments to manage its foreign currency, metals price

risk and interest rate risk exposures. Embedded derivatives are separated from the host contract and accounted for

separately if the economic characteristics and risks of the host contract and the embedded derivative are not closely

related, a separate instrument with the same terms as the embedded derivative would meet the definition of a

derivative, and the combined instrument is not measured at fair value through profit or loss.

Derivatives are recognised initially at fair value; attributable transaction costs are recognised in profit or loss when

incurred. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are

accounted for as described below.

Cash flow hedges

Changes in the fair value of the derivative hedging instrument designated as a cash flow hedge are recognised

directly in other comprehensive income and expense to the extent that the hedge is effective. To the extent that the

hedge is ineffective, changes in fair value are recognised in profit or loss.

If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated or

exercised, then the hedge accounting is discontinued prospectively. The cumulative gain or loss previously

recognised in other comprehensive income and expense remains there until the forecast transaction occurs. When

the hedged item is a non-financial asset, the amount recognised in other comprehensive income and expense is

transferred to the carrying amount of the asset when it is recognised. In other cases the amount recognised in other

comprehensive income and expense is transferred to profit and loss in the same period that the hedged item affects

profit or loss.

Separable embedded derivatives

Changes in the fair value of separable embedded derivatives are recognised immediately in profit or loss.

(iv) Cash and cash equivalents

Cash and cash equivalents comprise cash balances and deposits with maturities of three months or less from the

acquisition date that are subject to insignificant risk of change in the fair value and are used by the Group in the

management of its short-term commitments.

(v) Share capital

Ordinary shares

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares and

share options are recognised as a deduction from equity, net of any related income tax benefit.

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(d) Property, plant and equipment

(i) Recognition and measurement

Items of property, plant and equipment are stated at cost less accumulated depreciation and impairment losses

(refer to Note 4(m)). Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost

of self-constructed assets and acquired assets includes the cost of materials, direct labour, any other costs directly

attributable to bringing the asset to working condition for its intended use and the costs of dismantling and

removing the items and restoring the site on which they are located.

Mining development assets include costs transferred from exploration and evaluation assets, once technical

feasibility and commercial viability of an area of interest are demonstrable, and the subsequent costs required to

develop the mine to the production phase. Mine development assets are accounted for in terms of Note 4(e) below.

Cost may also include transfers from other comprehensive income and expense of any gain or loss on qualifying cash

flow hedges of foreign currency purchases of property, plant and equipment. Purchased software that is integral to

the functionality of the related equipment is capitalised as part of that equipment. When parts of an item of

property, plant and equipment have different useful lives they are accounted for as separate items (major

components) of property, plant and equipment.

(ii) Subsequent costs

The Group recognises in the carrying amount of an item of property, plant and equipment the cost of replacing part

of such an item when that cost is incurred, if it is probable that the future economic benefits embodied within the

item will flow to the Group and the cost of the item can be measured reliably. All other costs are recognised in profit

or loss as incurred.

(iii) Depreciation

The carrying amounts of property, plant and equipment (including initial and subsequent capital expenditure) are

depreciated to their estimated residual value over the estimated useful lives of the specific assets concerned or the

estimated life to the associated mine, if shorter. Depreciation is calculated using a straight line method over the

estimated useful lives of each part of an item of property, plant and equipment or are depreciated on the units of

production basis over the life of mine. Items of property, plant and equipment are depreciated from the date that

they are installed and are ready for use, or in respect of internally constructed assets from the date that the assets

are completed and ready for use. Depreciation is not charged on plant and equipment under construction.

The estimated useful lives are as follows:

• Plant and equipment 2.5 to 19 years or based on ore reserves on units of production basis;

• Mine properties based on ore reserves on units of production basis; and

• Leased assets based on lower of useful life and lease term.

The residual value, the useful life and the depreciation method applied to an asset are reassessed at least annually.

The new life of mine for Santa Rita has been assessed as 14 years (including 2015).

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(iv) Disposal

Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the

proceeds from disposal with the carrying amount of property, plant and equipment and are recognised net within

“other income and expense” in profit or loss.

(v) Nickel reserves

Ore reserves are estimates of the quantity of nickel that can be economically extracted from the Group’s Santa Rita

mining operation. In order to estimate ore reserves, assumptions are required about a range of geological, technical

and economic factors, including quantities, grade, mining and processing methods, process recovery by ore type,

production costs, future capital requirements, short and long term nickel prices and exchange rates.

Estimating the quantity and/or grade of ore reserves requires the size, shape and depth of ore bodies to be

determined by analysing geological data. This process requires a complex geological interpretation based on widely-

spaced exploration drilling data.

The Group determines and reports ore reserves under the Australian Code for Reporting of Mineral Resource and

Ore Reserves December 2012, known as The JORC Code. The JORC Code requires the use of reasonable investment

assumptions to calculate reserves. Due to the fact that economic assumptions used to estimate reserves change

from period to period, and geological data is generated during the course of operations, estimates of reserves may

change from period to period. Changes in reported ore reserves may affect the Group’s financial results and

position in a number of ways including:

• Asset carrying values may be impacted due to changes in the estimated future cash flows;

• Depreciation and amortisation charged in the income statement may change where such changes are calculated

using the units of production basis; and

• Decommissioning, site restoration and environmental provisions may change where changes in estimated

reserves alter expectations about the timing or cost of these activities. Changes in estimates are capitalised to

the underlying assets.

If changes in estimates occur, depreciation and amortisation of mining assets are adjusted prospectively.

(e) Mine Properties

Once the technical feasibility and commercial viability of the extraction of mineral resources in a particular area of

interest become demonstrable, the exploration and evaluation assets attributable to that area of interest are

reclassified as mine properties and disclosed as a component of property, plant and equipment. All development

costs subsequently incurred within that area of interest are capitalised and carried at cost.

Amortisation of capitalised mine properties is provided on the unit-of-production method resulting in an

amortisation charge proportional to the depletion of the economically recoverable mineral resources. Costs are

amortised from the commencement of commercial production.

Overburden removal costs

Overburden and other mine waste material are often removed during the initial development of a mine site in order

to access the mineral deposit. The directly attributable costs, inclusive of an allocation of relevant overhead

expenditure, are capitalised as mine properties within property, plant and equipment. Capitalisation ceases and

depreciation of those costs commences at the time that commercial levels of saleable material are being extracted

from the mine. Depreciation is determined on a unit of production basis for each area of interest.

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(f) Deferred stripping costs

IFRIC 20, Stripping Costs in the Production Phase of a Surface Mine, outlines how costs associated with waste

removal (stripping) during the production phase of a surface mine are to be accounted for. Where the stripping

activity gives rise to a benefit in the current period, stripping costs are to be accounted for as the cost of inventory.

Where the activity results in improved access to ore in future periods, the costs are recognised as a non-current

asset, providing certain criteria are met. In determining an appropriate allocation basis between inventory and non-

current asset, IFRIC 20 provides guidance on possible metrics to use. After recognition, the stripping activity asset is

then amortised on a systematic basis (unit of production method) over the expected useful life of the identified

component of the ore body that becomes more accessible as a result of the stripping activity.

The Group identified two separate components within its surface mine. One of these components is immaterial in

terms of effective life, volume of ore to be mined and cost of such mining, in comparison to the total mine. As such,

the Group determined that due to the immateriality of this specific component it may be combined with the core

component when determining the allocation between inventory and non-current asset. Also, the Group’s current

allocation methodology is in line with IFRIC 20’s suggested metrics, that being ‘the volume of waste extracted

compared with expected volume, for a given volume of ore production’.

As deferred stripping costs are included in mine properties, within property, plant & equipment, these will form part

of the relevant cash generating units which are reviewed for impairment if events or changes of circumstances

indicate that the carrying value may not be recoverable.

(g) Exploration and evaluation expenditure

Exploration and evaluation costs, which are intangible costs, including the costs of acquiring licences, are capitalised

as exploration and evaluation assets on an area of interest basis. Costs incurred before the Group has obtained the

legal rights to explore an area are recognised in the consolidated statement of profit or loss and other

comprehensive income.

Exploration and evaluation assets are only recognised if the rights of the area of interest are current and either:

• The expenditures are expected to be recouped through successful development and exploitation of the area of

interest; or

• Activities in the area of interest have not at the reporting date reached a stage which permits a reasonable

assessment of the existence or otherwise of economically recoverable reserves and active and significant

operations in, or in relation to, the area of interest are continuing.

Exploration and evaluation assets are assessed for impairment if (i) sufficient data exists to determine technical

feasibility and commercial viability, and (ii) facts and circumstances suggest that the carrying amount exceeds the

recoverable amount (refer to Note 4(m)). For the purposes of impairment testing, exploration and evaluation assets

are allocated to cash generating units to which the exploration activity relates. The cash generating unit shall not be

larger than the area of interest.

Once the technical feasibility and commercial viability of the extraction of mineral resources in an area of interest

are demonstrable, exploration and evaluation assets attributable to that area of interest are first tested for

impairment and then transferred to mine properties within property, plant and equipment.

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(h) Leased assets

Leases in terms of which the Group assumes substantially all the risks and rewards of ownership are classified as

finance leases. Upon initial recognition the leased asset is measured at an amount equal to the lower of its fair value

and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for

in accordance with the accounting policy applicable to that asset.

Other leases are operating leases and are not recognised on the Group’s consolidated statement of financial

position.

Lease payments

Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term of the

lease. Lease incentives received are recognised as an integral part of the total lease expense, over the term of the

lease.

Minimum lease payments made under finance leases are apportioned between the finance expense and the

reduction of the outstanding liability. The finance expense is allocated to each period during the lease term so as to

produce a constant periodic rate of interest on the remaining balance of the liability.

Contingent lease payments are accounted for by revising the minimum lease payments over the remaining term of

the lease when the lease adjustment is confirmed.

(i) Revenue

Revenue is recognised to the extent that it is probable that economic benefits will flow to the Group and the

revenue can be reliably measured. Revenue is measured at the fair value of the consideration received or receivable,

excluding discounts, rebates, and sales taxes or duty.

Revenue from the sale of goods is recognised when the significant risks and rewards of ownership have been

transferred, which is considered to occur when the title passes to the customer. This generally occurs when product

is physically transferred onto a vessel, or other delivery mechanism.

Metals in concentrate

In cases where the terms of the executed sales agreement allow for an adjustment to the sales price based on a

survey of the goods by the customer (for instance an assay for mineral content), recognition of the sales revenue is

based on the most recently determined estimate of product specifications.

The sales price for nickel is determined on a provisional basis at the date of sale; adjustments to the sales price

subsequently occurs based on movements in quoted market prices up to the date of final pricing. The period

between provisional invoicing and final pricing is typically between two to four months. Revenue on provisionally

priced sales is recognised based on the estimated fair value of the total consideration receivable. The revenue

adjustment mechanism embedded within provisionally priced sales arrangements has the character of a commodity

derivative. Accordingly, the fair value of the final sales price adjustment is re-estimated at period end and changes

in fair value are recognised as an adjustment to revenue. In all cases, fair value is estimated by reference to forward

market prices.

Sales revenue includes realised gains and losses associated with Nickel, Copper and Foreign Exchange forward

contracts.

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(j) Trade receivables

Trade receivables are initially recognised on a provisional basis at the time of sale and subsequently adjusted based

on the movements in the quoted market prices and assay results up to the date of final pricing (refer to Note 4(i)).

The mark to market of trade receivables is recorded as an adjustment to the sales revenue.

Trade receivables settlement terms are as follows:

• 90% of the invoice value is settled within 7-70 days from the month of sale or date of Bill of Lading; and

• 10% of the invoice value is settled within 15 days of presentation of the final invoice at the end of the quotation

period (normally two to four months following the month of sale).

Collectability of trade receivables is reviewed on an ongoing basis. An allowance for doubtful debts is established

when there is objective evidence that the Company may not be able to collect all amounts due according to the

original terms of receivables. Debts which are known to be uncollectible are written off.

(k) Other receivables

Other receivables are recorded at amounts due less any allowance for doubtful debts.

(l) Inventories

Inventories are stated at the lower of cost and net realisable value. Net realisable value represents estimated selling

price in the ordinary course of business less any further costs expected to be incurred to completion and disposal.

Cost is determined on a weighted-average basis and includes all costs incurred in the normal course of business

including direct material and direct labour costs and an allocation of production overheads, depreciation and

amortisation and other costs incurred in bringing each product to its present location and condition.

Quantities of broken ore and concentrate stocks are assessed primarily through surveys and assays.

Inventories are categorised as follows:

• Broken ore: ore stored in an intermediate state that has not yet passed through all the stages of production;

• Concentrate: products and materials that have passed through all stages of the production process; and

• Stores, spares and consumables: materials, goods or supplies (including energy sources) to be either directly or

indirectly consumed in the production process.

(m) Impairment

(i) Financial assets

A financial asset is assessed at each reporting date to determine whether there is any objective evidence that it is

impaired. A financial asset is considered to be impaired if objective evidence indicates that one or more events have

had a negative effect on the estimated future cash flows of that asset.

An impairment charge in respect of a financial asset measured at amortised cost is calculated as the difference

between its carrying amount, and the present value of the estimated future cash flows discounted at the original

effective interest rate.

Individually significant financial assets are tested for impairment on an individual basis. The remaining financial

assets are assessed collectively in groups that share similar credit risk characteristics.

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All impairment charges are recognised in profit or loss. Any cumulative loss in respect of an available-for-sale

financial asset recognised previously in other comprehensive income and expense is transferred to profit or loss.

An impairment charge is reversed if the reversal can be related objectively to an event occurring after the

impairment charge was recognised. For financial assets measured at amortised cost and available-for-sale financial

assets that are debt securities, the reversal is recognised in profit or loss. For available-for-sale financial assets that

are equity securities, the reversal is recognised directly in other comprehensive income and expense.

(ii) Non-financial assets

The carrying amounts of the Group’s non-financial assets, other than deferred tax assets, are reviewed at each

reporting date to determine whether there is any indication of impairment. If any such indication exists then the

asset’s recoverable amount is estimated.

The recoverable amount of an asset or cash generating unit is the greater of its value in use and its fair value less

cost to sell. Fair value less cost to sell is determined as a present value of the estimated real future cash flows

expected to arise from the continued use of the asset using assumptions that an independent market participant

may consider. These cash flows are discounted using a real after tax discount rate that reflects current market

assessments of the time value of money and the risks specific to the cash generating unit. For the purpose of

impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from

continuing use that are largely independent of the cash inflows of other assets or groups of assets (the cash

generating unit).

An impairment charge is recognised if the carrying amount of an asset or its cash-generating unit exceeds its

recoverable amount. Impairment charges are recognised in profit or loss. Impairment charges recognised in respect

of cash generating units are allocated first to reduce the carrying amount of any goodwill allocated to the units and

then to reduce the carrying amount of the other assets in the unit (group of units) on a pro rata basis.

In respect of other assets, impairment charges recognised in prior periods are assessed at each reporting date for

any indications that the loss has decreased or no longer exists. An impairment charge is reversed if there has been a

change in the estimates used to determine the recoverable amount. An impairment charge is reversed only to the

extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net

of depreciation or amortisation, if no impairment charge had been recognised.

(n) Employee benefits

(i) Share based payment transactions

The grant date fair value of share-based payment awards granted to employees is recognised as an employee

expense, with a corresponding increase in equity, over the period that the employees become entitled to the

awards. The amount recognised as an expense is adjusted to reflect the number of awards for which the related

service and non-market vesting conditions are expected to be met, such that the amount ultimately recognised as an

expense is based on the number of awards that meet the related service and non-market performance conditions at

the vesting date. For share-based payment awards with market vesting conditions, the grant date fair value of the

share-based payment is measured to reflect such conditions and there is no true-up for differences between

expected and actual outcomes.

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(ii) Wages, salaries and annual leave

Liabilities for employee benefits for wages, salaries and annual leave that are expected to be settled within 12

months of the reporting date, which represent present obligations resulting from employees’ services provided to

the reporting date, are calculated at undiscounted amounts based on remuneration wage and salary rates that the

Group expects to pay as at the reporting date including related on-costs, such as pension and superannuation

contributions, social security, workers compensation and health insurance, as well as payroll tax.

(iii) Short-term employee benefits

Short term employee benefits obligations are measured on an undiscounted basis and are expensed as the related

service is provided. A liability is recognised for the amount expected to be paid under short term cash incentives if

the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by

the employee, and the obligation can be estimated reliably.

(iv) Termination benefits

Termination benefits are expensed at the earlier of when the Group can no longer withdraw the offer of those

benefits and when the Group recognises costs for the restructuring. If benefits are not expected to be settled wholly

within 12 months from the end of the reporting period then they are discounted.

(o) Provisions

A provision is recognised in the consolidated statement of financial position when the Group has a present legal or

constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be

required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-

tax rate that reflects current market assessments of the time value of money and, when appropriate, the risks

specific to the liability.

Rehabilitation

Rehabilitation includes mine closure and restoration costs which include the costs of dismantling and demolition of

infrastructure or decommissioning, the removal of residual material and the remediation of disturbed areas specific

to the site. Provisions are recognised at the time that the environmental disturbance occurs.

The provision is the best estimate of the present value of the future cash flows required to settle the restoration

obligation at the reporting date, based on current legal requirements and technology. Future restoration costs are

reviewed annually and any changes are reflected in the present value of the restoration provision at the end of the

financial year.

The amount of the provision for future rehabilitation costs and changes in estimates to the provision are capitalised

as an asset and recognised in property, plant and equipment and is depreciated over the useful life of the mineral

resource. The unwinding of the effect of discounting on the provision is recognised as a finance cost.

(p) Trade and other payables

Trade and other payables are non-interest bearing liabilities stated at cost and with a settlement period of less than

twelve months.

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(q) Finance income and expense

Finance income comprises interest income on funds invested. Interest income is recognised in profit or loss as it

accrues, using the effective interest method.

Finance expenses comprise discounting of rehabilitation costs and interest expenses relating to borrowings.

(r) Borrowings

Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently

measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption

amount is recognised in profit or loss over the period of the borrowings using the effective interest method. Fees

paid on the establishment of loan facilities, which are not an incremental cost relating to the actual draw-down of

the facility, are recognised as prepayments and amortised on a straight-line basis over the term of the facility.

Borrowings are removed from the statement of financial position when the obligation specified in the contract is

discharged, cancelled or expired. The difference between the carrying amount of a financial liability that has been

extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred

or liabilities assumed, is recognised in other income or other expenses.

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the

liability for at least twelve months after the reporting date.

Borrowing costs

Borrowing costs incurred for the construction of any qualifying asset are capitalised during the period of time that is

required to complete and prepare the asset for its intended use or sale. Other borrowing costs are expensed.

(s) Income tax

Income tax disclosed in profit or loss for the periods presented comprises current and deferred tax. Income tax is

recognised in profit or loss except to the extent that it relates to items recognised directly in equity or other

comprehensive income and expense, in which case it is recognised in equity or other comprehensive income and

expense.

Current tax is the expected tax payable, or receivable, on the taxable income, or loss, for the year, using tax rates

enacted or substantially enacted at the reporting date, and any adjustment to tax payable in respect of previous

years.

Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities

for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for the

following temporary differences: the initial recognition of assets or liabilities in a transaction that is not a business

combination and that affects neither accounting nor taxable profit or loss, and differences relating to investments in

subsidiaries and jointly controlled entities to the extent that it is probable that they will not reverse in the

foreseeable future. In addition, deferred tax is not recognised for taxable temporary differences arising on the initial

recognition of goodwill. Deferred tax is measured at the tax rates that are expected to be applied to the temporary

differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting

date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities

and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on

different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and

liabilities will be realised simultaneously.

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A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available

against which the asset can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to

the extent that it is no longer probable that the related tax benefit will be realised, or to the extent that the Group

has deferred tax liabilities with the same taxation authority.

Additional income taxes that arise from the distribution of dividends are recognised at the same time that the

liability to pay the related dividend is recognised.

(t) Earnings per share

The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by

dividing the profit or loss attributable to ordinary shareholders by the weighted-average number of ordinary shares

outstanding during the period.

Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted-

average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares, which

comprise share options, performance rights granted and other convertible instruments.

(u) Sales tax and other indirect taxes

Revenue, expenses and assets are recognised net of the amount of sales tax and other indirect taxes, except where

the amount of sales tax and other indirect taxes incurred are not recoverable from the taxation authority. In these

circumstances, the sales tax and other indirect taxes are recognised as part of the cost of acquisition of the asset or

as part of the expense.

Receivables and payables are stated with the amount of sales tax and other indirect taxes included. The net amount

of sales tax and other indirect taxes recoverable from, or payable to, the taxation authorities are included as a

current asset or liability in the consolidated statement of financial position.

Cash flows are included in the consolidated statement of cash flows on a gross basis. The sales tax and other indirect

taxes components of cash flows arising from investing and financing activities which are recoverable from, or

payable to, the taxation authorities are classified as operating cash flows.

(v) Determination and presentation of operating segments

An operating segment is a component of the Group that engages in business activities from which it may earn

revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s

other components. All operating segments’ operating results are regularly reviewed to make decisions about

resources to be allocated to the segment and assess its performance, and for which discrete financial information is

available.

Segment results that are reported include items directly attributable to a segment as well as those that can be

allocated on a reasonable basis.

Segment capital expenditure is the total cost incurred during the period to acquire loans and borrowings, property,

plant and equipment.

(w) Comparatives

The financial statements for the year ended 31 December 2014 are prepared on a going concern basis (refer to Note

3(e)), whereas the comparative disclosures for 31 December 2013 were prepared on a non-going concern basis.

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(x) New standards and interpretations not yet adopted

A number of new standards, amendments to standards and interpretations are effective for annual periods

beginning after 1 January 2014, and have not been applied in preparing these financial statements. None of these is

expected to have a significant effect on the financial statements of the Company, except for AASB 9 Financial

Instruments which becomes mandatory for the Company’s 2018 financial year end and AASB 15 Revenue from

Contracts with Customers, which becomes mandatory for the Company’s 2017 financial statements. The Company

does not plan to adopt these standards early and the extent of the impact has not been determined.

(y) New currently effective requirements

The Company has adopted the following new standards and amendments to standards, including any consequential

amendments to other standards, with a date of initial application of 1 January 2014.

Amendments to AASB 1031 Materiality

Annual improvements 2010-2012

Annual improvements 2011-2013

Offsetting Financial Assets and Financial Liabilities (Amendments to AASB 132)

Recoverable Amounts Disclosures for Non-Financial Assets (Amendments to AASB 136)

The nature and effects of the changes required by these standards has no material impact on the financial

statements of the Company.

5. DETERMINATION OF FAIR VALUES

A number of the Group’s accounting policies and disclosures require the determination of fair value, for both

financial and non-financial assets and liabilities. Fair values have been determined for measurement and/or

disclosure purposes based on the following methods.

When measuring the fair value of an asset or a liability, the Group uses market observable data as far as possible.

Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation

techniques as follows:

Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either

directly (i.e. as prices) or indirectly (i.e. derived from prices).

Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

Where applicable, further information about the assumptions made in determining fair values is disclosed in the

notes specific to that asset or liability.

(i) Convertible note liability and derivative

The fair value of the convertible note derivative has been determined by firstly computing the fair value per

convertible option feature multiplied by the number of outstanding options. The fair value per option is computed

using an option pricing model that takes account of the exercise price, the term of the option, the Company’s share

price at the end of the reporting period, the expected volatility of the underlying share price and the risk-free

interest rate (based on government bonds). The expected volatility is based upon historic volatility (based on the

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remaining life of the options) adjusted for abnormal trends on the Company’s share price. Given the shares of the

Company were only reinstated on the ASX on 16 February 2015, from a voluntary suspension on 19 December 2014,

judgements were required as to the expected volatility as at 31 December 2014.

(ii) Other derivative financial instruments

A derivative is initially recognised at fair value on the date a derivative contract is entered into and is subsequently

remeasured at its fair value. The method of recognising the resulting gain or loss depends on whether the derivative

is designated as a hedging instrument and, if so, the nature of the item being hedged. The fair value of financial

instruments traded in active markets (such as publicly traded derivatives) is based on quoted market prices at the

reporting date. The fair value of financial instruments that are not traded in an active market (for example, over-the-

counter derivatives) is determined by using appropriate valuation techniques and making assumptions that are

based on market conditions existing at each reporting date. A discounted cash flow method is used to determine

the fair value of long-term borrowings.

The fair value of forward foreign exchange and commodity contracts is calculated as the present value of expected

future cash flows relating to the difference between the contract rates and the market forward rates at the

reporting date. In measuring the swap transactions, the fair value is the net present value of the estimated future

cash flows discounted at the market quoted swap rates. All fair values are adjusted for credit impact where required.

The carrying values of the current financial assets and current financial liabilities approximate their fair values.

(iii) Non-derivative financial assets and liabilities

Fair value, which is determined for disclosure purposes, is calculated based on the present value of future principal

and interest cash flows, discounted at the market rate of interest at the reporting date.

The carrying values of the current financial assets and current financial liabilities approximate their fair values.

(iv) Share based payment transactions

The fair value of performance rights is measured using the Monte Carlo pricing model and options are measured

using the binomial option-pricing model. Measurement inputs include share price on measurement date, exercise

price of the instrument, expected volatility (based on weighted-average historic volatility adjusted for changes

expected due to publicly available information), weighted-average expected life of the instruments (based on

historical experience and general option holder behaviour), expected dividends and the risk-free interest rate (based

on government bonds). Service and non-market performance conditions attached to the transactions are not taken

into account in determining fair value.

The fair value of performance rights and options granted to employees at grant date is recognised as an employee

expense, and is not required to adjust the fair value afterwards (even if it becomes more or less valuable or does not

ultimately vest) unless the award is modified. The performance rights are subjected to both service conditions and

performance conditions.

Service conditions are not included in estimating the fair value at grant date.

A performance condition can either be market vesting or non-market vesting.

For market vesting conditions, the Group is required to take into consideration the probability of reaching the target

shareholder return when estimating the fair value of the equity instruments at grant date.

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For non-market vesting conditions, the Group does not take into account the vesting conditions when estimating the

fair value of the equity instruments granted. Therefore, the Group will only consider the vesting conditions in their

calculation when estimating the number of equity instruments expected to vest during the vesting period.

The only fair value assets and liabilities currently in the Company as at 31 December 2014 are Property, Plant and

Equipment, as stated in Note 21.

6. SEGMENT INFORMATION

During the year, the Group operated in one business and operating segment, mineral exploration and production,

and in one primary geographical area, Brazil, with two customers: Norilsk Nickel Harjavalta Oy (Norilsk Nickel),

subsidiary of OJSC MMC Norilsk Nickel, and an international trading house (ITH). Sales for the year ended 31

December 2014 were split 57% to Norilsk Nickel, and 43% to ITH (31 December 2013: 69% to Votorantim, 21% to

Norilsk Nickel, and 10% to ITH).

Customer Sector Group Principal Activities

Base Metals Mining of nickel, copper, cobalt and platinum in Brazil

The Group has one reportable segment and no unallocated assets, liabilities, equity, profit or loss.

The accounting policies applied for internal reporting purposes are consistent with those applied in preparation of

these financial statements.

7. SALES REVENUE

31 December

2014

31 December

2013

US$000 US$000

Nickel Sales 121,489 165,622

Copper Sales 8,747 12,556

Cobalt Sales 1,273 2,858

Other Sales 6,168 13,144

Sales Revenue 137,677 194,180

Nickel Sales are comprised as follows:

31 December

2014

31 December

2013

US$000 US$000

Realised nickel sales 119,480 172,394

Revaluation of unrealised nickel sales 3,863 (3,126)

Unwinding of metal and foreign exchange forward contracts

designated as hedges (1,854) (3,646)

Nickel Sales 121,489 165,622

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Realised nickel sales for the year ended 31 December 2014 comprised 9,213 tonnes of nickel in concentrate (year

ended 31 December 2013: 13,602 tonnes), 81% being payable (year ended 31 December 2013: 89%) at an average

realised nickel price of US$7.24/Ib (year ended 31 December 2013: US$6.46/lb).

Revaluation of unrealised nickel sales comprise of forward price revaluation on sales that have not been finalised as

at the period end. In accordance with the Group’s off-take agreements, sales are initially recognised using a

provisional sales price, being the average LME price of the month prior to the month of sale. Adjustments to the

sales price subsequently occur, based on movements in quoted market prices up to the date of final pricing.

Adjustments are also made to the sales volume upon finalisation of assays as per the Group’s off-take agreements.

The period between provisional invoicing and final pricing is typically between two to four months. Accordingly, the

fair value of the final sales price adjustment is estimated at period end and changes in the fair value are recognised

as an adjustment to revenue. For revaluation purposes fair value is estimated using the forward LME price of the

second month after the month of the provisional sale.

During the year ended 31 December 2011 the Group terminated all of its outstanding metal and foreign exchange

forward contracts designated as hedges. The ineffective portion of the termination costs relating to these hedges

were recognised as an expense and the effective portion were recognised in the hedge reserve. This hedge reserve

unwinds to revenue upon realisation of the original underlying hedged transactions (refer to Note 19).

8. FINANCIAL INCOME/(EXPENSE)

31 December

2014

31 December

2013

US$000 US$000

Interest received 1,327 5,070

Financial income 1,327 5,070

Interest expense(a)

(33,876) (41,840)

Borrowing costs (127) (11,017)

Discounting of rehabilitation costs (1,021) (1,241)

Financial expense (35,024) (54,098)

(a) Interest expense for 31 December 2014 includes the interest charge on the Senior Convertible Secured Notes

(SCSNs) (US$5.653 million), along with interest on the original senior unsecured notes up to the date of

forgiveness (US$19.442 million). No interest is payable in cash on the SCSNs until maturity date, being 24 June

2019. Similarly to the SCSN prinicipal, the incurred interest on the SCSNs is also convertible to shares at the

option of the SCSN Holders. Interest is not payable in cash if converted (refer Note 24).

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9. OTHER INCOME/(EXPENSE)

31 December

2014

31 December

2013

US$000 US$000

Debt Forgiveness(a)

439,715 -

Fair Value adjustment on Derivative(b)

61,987 -

Sundry 518 816

Other income 502,220 816

Recoverable Brazilian tax credits write-off(c)

(11,022) (7,923)

Critical spares write-off(d)

- (2,371)

Research expenses (827) (2,197)

Indirect taxes (1,943) (1,698) Reversal of provision for rehabilitation: discount and inflation rate adjustment (3,138) -

Provision for doubtful debts - (1,329)

Provision for onerous lease - (298)

Restructuring expenses(e)

(14,872) -

Subordinated notes expense(f)

(100) -

Sundry (1,297) (398)

Other expenses (33,199) (16,214)

Other expenses - net 469,021 (15,398)

(a) Debt forgiveness

Resulting from the Company restructure, the Senior Unsecured Noteholder debt of US$395.000 million 8.75% Senior

Unsecured Notes due 15 April 2018 (Original Noteholders) and incurred interest, were extinguished on 25 June 2014

at the termination of the Deed of Company Arrangement (DOCA). In return, the Original Noteholders became

entitled to approximately 98.2% of the Company’s existing ordinary shares on issue at that time (DOCA Shares). The

DOCA Shares were transferred from existing shareholders of the Company (by order of the Supreme Court of New

South Wales) to a trustee who holds them as bare trustee (Mirabela Investments Pty Ltd) for the Original

Noteholders.

(b) Fair value adjustment

The value of the option component of the Senior Convertible Secured Notes fluctuates with the Company’s

underlying share price and the USD:AUD exchange rate as reported from period to period, which is reflected as the

fair value adjustment (refer to Note 25).

(c) Recoverable Brazilian tax credits

As a result of the concentrate sales shift from Votorantim to an international trading house, there is no certainty

that the accumulating Brazilian state input tax credits, which usually get offset against the same indirect taxes on

domestic sales, will be fully utilised in the future. However, approval was recently granted by the Brazil Bahia State

Tax Authority for the Group to utilise these credits against other specific tax liabilities and to potentially sell

remaining credits to third party entities at a discount, under specific conditions.

(d) Critical Spares write-off

Relates to critical spares no longer required for use by the Company.

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(e) Restructuring expenses

The restructuring expenses relate to the non-cash fees incurred in accordance with the Syndicated Note Subscription

Deed, which formed part of the debt that was repaid by the Company via the issuance of the Senior Convertible

Secured Notes (refer Note 24). Legal and advisory expenses relating to the Company restructure form part of

general & administration costs and are commented on in Note 10.

(f) Subordinated notes expense

As a requirement of part of the restructuring and recapitalisation of the Company, US$5.000 million, 1.00%, 30 year

subordinated notes (Subordinated Notes) were issued for no consideration to former holders of the US$395.000

million, 8.75% senior unsecured notes originally due in 2018, resulting in a US$5.000million expense. This was

mostly offset by the fair value gain resulting from the fair value assessment of the Subordinated Notes (refer Note

24).

10. GENERAL & ADMINISTRATION EXPENSE

The general & administration expenses include legal and advisory fees of approximately US$15.508 million relating

to the Company’s recent restructure/recapitalisation process.

11. AUDITOR’S REMUNERATION

31 December

2014

31 December

2013

US$ US$ Audit services

KPMG Australia: Audit & review of financial reports 385,037 399,132

KPMG Brazil: Audit & review of financial reports 125,443 103,374

510,480 502,506

Other services

KPMG Australia: Other assurance and advisory services(a)

46,728 43,723

KPMG Brazil: Other assurance services(a)

29,199 37,801

75,927 81,524

(a) Other assurance and advisory services

These include advisory services relating to an investigating accountant’s report provided during the Company’s

recapitalisation (US$37,453), the ongoing hotline for the Whistleblower program in Brazil, along with general

accounting advisory support.

12. EMPLOYEE BENEFITS

31 December

2014

31 December

2013

Note US$000 US$000

Salaries and fees 12,134 13,327

Superannuation 201 271

Share based payments expense 13 328 620

12,663 14,218

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13. SHARE BASED PAYMENTS

(a) Expenses arising from share based transactions

31 December

2014

31 December

2013

US$000 US$000 Equity-settled performance rights and share options granted during:

Period ended 31 December 2011 - (39)

Period ended 31 December 2012 (8) 483

Period ended 31 December 2013 336 176

Total expense recognised as employee costs 328 620

(b) Performance rights





however, on 10 January 2014, the previous Committee suspended these performance rights.

On 10 January 2014 the previous Committee also suspended the “2013 Mirabela Nickel Limited Long Term Incentive

Plan” (LTI) – which was originally approved at a Shareholders meeting held on 30 May 2013. The LTI was

subsequently cancelled by Martin Madden in his capacity as joint and several administrator of Mirabela Nickel

Limited on 5 May 2014. As such, no LTI benefits were awarded for 2014.

The Group measured the fair value of a share-based payment award issued to eligible employees at grant date and

was not required to adjust the fair value afterwards (even if it became more or less valuable or did not ultimately

vest) unless the award was modified. Where the service condition had commenced before the grant date a

provisional fair value was calculated for a share-based payment award, which was revised upon grant date.

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Movement in performance rights during the year

The movement during the financial year in the number of performance rights held in the Company is as follows:

31 December 2014

Condition

Grant date Vesting date

Fair value at grant

date

A$

Held at

1 January

2014

Granted/

issued

Converted

to

shares

Cancelled

or

forfeited

Held at

31

December

2014

2012 non-market strategic objectives

(cost reduction, optimisation and

exploration goals) (1) 9 Feb 2012 31 Dec 2013 0.99 482,263 - - - 482,263

2013 non-strategic condition (adjusted

EBITDA per Share)(2) 30 May 2013 31 Dec 2015 0.18 2,263,891 - - (2,263,891) -

2013 market performance condition

(RTSR)(2) 30 May 2013 31 Dec 2015 0.07 2,263,891 - - (2,263,891) -

5,010,045 - - (4,527,782) 482,263

(1) Performance rights were suspended by the previous Committee on 10 January 2014. (2) Performance rights were cancelled by Martin Madden in his capacity as joint and several administrator of Mirabela Nickel Limited on 5 May 2014.

31 December 2013

Condition

Grant date Vesting date

Fair value at grant

date

A$

Held at

1 January

2013

Granted/

issued

Converted

to

shares

Cancelled

or

forfeited

Held at

31

December

2013

2011 non-market strategic objective(1) 31 Mar 2011 31 Dec 2012 1.84 182,358 - (182,358) - -


(cost reduction, optimisation and

exploration goals) (2) 9 Feb 2012 31 Dec 2013 0.99 518,316 - (36,053) - 482,263


(organic growth)(3) 9 Feb 2012 31 Mar 2014 0.99 140,806 - - (140,806) -

2012 market performance objective(3) 9 Feb 2012 30 Jun 2014 0.54 704,029 - - (704,029) -

2013 non-market strategic objective &

market performance objective(3) (old

Plan) 9 Feb 2012 31 Dec 2014 0.48(5) 338,847 - - (338,847) -

2013 non-strategic condition (adjusted

EBITDA per Share)(4) 30 May 2013 31 Dec 2015 0.18 - 2,304,774 - (40,883) 2,263,891

2013 market performance condition

(RTSR)(4) 30 May 2013 31 Dec 2015 0.07 - 2,304,773 - (40,882) 2,263,891

1,884,356 4,609,547 (218,411) (1,265,447) 5,010,045

(1) 182,358 performance rights were converted to shares on 23 January 2013. At this date the Company’s share price was A$0.50. (2) 36,053 performance rights were converted to shares on 31 May 2013. A this date the Company’s share price was A$0.17. (3) Performance rights were suspended and then subsequently cancelled by the previous Board on 18 March 2013. (4) Performance rights were cancelled by the previous Board on 10 January 2014. (5) Performance rights were provisionally valued at 31 December 2012 as performance conditions had not been advised by the previous Board.

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(c) Options


were unexercised and as a result have expired. There were no options outstanding as at 31 December 2014. (31

December 2013: 400,000).

31 December 2014

Grant date Expiry date

Exercise price

A$(1)

Exercise price

US$(1)

Balance at start of the

year

Granted during

the year

Exercised during

the year

Expired during

the year

Balance at end of

the year

Exercisable at end of the year

Number Number Number Number Number Number

25/09/2009 30/06/2014 $3.00 $2.46 400,000 - - (400,000) - -

400,000 - - (400,000) - -

Weighted average exercise price (US$) $2.46 - - $2.46 - -

Weighted average exercise price (A$) $3.00 - - $3.00 - -

(1) 400,000 options were not exercised by the expiry date of 30 June 2014 and as a result have lapsed (presented in US$ at 31 December 2014 rate of 0.8194).

31 December 2013

Grant date Expiry date

Exercise price

A$(1)

Exercise price

US$(1)

Balance at start of the

year

Granted during

the year

Exercised during

the year

Expired during

the year

Balance at end of

the year

Exercisable at end of the year

Number Number Number Number Number Number

24/11/2008 07/07/2013 $3.00 $2.68 3,000,000 - -

(3,000,000) - -

25/09/2009 30/06/2014 $3.00 $2.68 400,000 - - - 400,000 400,000

05/11/2009 07/07/2013 $3.00 $2.68 750,000 - - (750,000) - -

4,150,000 - - (3,750,000) 400,000 400,000

Weighted average exercise price (US$) $2.68 - - $2.68 $2.68 $2.68

Weighted average exercise price (A$) $3.00 - - $3.00 $3.00 $3.00

(1) All options are exercisable in A$ (presented in US$ at 31 December 2013 rate of 0.89392).

14. INCOME TAX EXPENSE

Major components of income tax expense for the year ended 31 December 2014 and year ended 31 December 2013

are:

31 December

2014

31 December

2013

US$000 US$000 Consolidated statement of profit or loss and other comprehensive income

Deferred income tax expense 8,791 -

Income tax expense reported in consolidated statement of profit or loss and other comprehensive income 8,791 -

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Reconciliation of income tax expense to accounting profit/(loss) before tax

The reconciliation of the income tax expense arising on accounting profit/(loss) before income tax at the statutory

income tax rate to the actual income tax expense, for the year ended 31 December 2014 and year ended 31

December 2013 are as follows:

31 December

2014

31 December

2013

US$000 US$000

Accounting profit/(loss) before income tax 391,736 (493,861)

Tax on profit/(loss) at prima facie income tax rate of 30% (31 December 2013: 30%) 117,521 (148,158) Add/(deduct):

(Non-assessable)/non-deductible items resulting from forgiveness of external funding (131,674) -

Taxable gains resulting from forgiveness of external funding 3,675 -

Non-taxable adjustments related to convertible notes (16,201) -

Other (non-assessable)/non-deductible items (5,844) 1,676

Differences in global tax rates (4,832) (11,038)

Deferred tax asset (including tax losses) (recognised)/not recognised 46,146 157,520

Income tax expense 8,791 -

Current tax liabilities

The provision for current tax as at 31 December 2014 was US$ Nil (31 December 2013: US$ Nil).

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Deferred tax assets and liabilities

Deferred tax assets and liabilities are attributable to the following:

Group Assets Liabilities Net

31 December

2014 31 December

2013 31 December

2014 31 December

2013 31 December

2014 31 December

2013

US$000 US$000 US$000 US$000 US$000 US$000 Property, plant & equipment (137,098) (177,340) - - (137,098) (177,340) Cash and cash equivalents - - 414 1 414 1 Trade and other receivables (384) - - - (384) -

Prepayments - (428) 1 - 1 (428)

Inventory (2,804) (3,162) - - (2,804) (3,162)

Intercompany interest - assessable - - 20,777 14,815 20,777 14,815 Current tax assets - (2,806) - - - (2,806) Trade and other payables (3,387) (5,882) - - (3,387) (5,882) Provisions (341) (61) - - (341) (61)

Borrowings (54,338) (56,777) - - (54,338) (56,777)

Brazil reserves - (3,123) - - (3,123)

Capital raising costs - (1,767) - - - (1,767) Tax losses carried forward (81,321) (91,212) - - (81,321) (91,212) Deferred tax assets not recognised 267,272 327,742 - - 267,272 327,742

Tax (assets)/ liabilities (12,401) (14,816) 21,192 14,816 8,791 -

Tax set off 12,401 14,816 (12,401) (14,816) - -

Net tax (assets)/liabilities - - 8,791 - 8,791 -

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Movement in temporary differences during the year ended 31 December 2014:

US$000

Balance

1 January

2014

Recognised in

Income

Recognised in

Equity

Balance

31 December

2014

Intercompany interest - assessable 14,815 5,962 - 20,777

Borrowings (56,777) 2,439 - (54,338)

Current tax assets (2,806) 2,806 - -

Property, plant and equipment (177,340) 40,242 - (137,098)

Cash and cash equivalents 1 413 - 414

Trade and other receivables - (384) - (384)

Prepayments (428) 429 - 1

Inventory (3,162) 358 - (2,804)

Trade and other payables (5,882) 2,495 - (3,387)

Provisions (61) (280) - (341)

Brazil reserves (3,123) - 3,123 -

Capital raising costs (1,767) - 1,767 -

Tax losses carried forward (91,212) 9,891 - (81,321)

Deferred tax assets not recognised 327,742 (55,580) (4,890) 267,272

- 8,791 - 8,791

Movement in temporary differences during the year ended 31 December 2013:

US$000

Balance

1 January

2013

Recognised in

Income

Recognised in

Equity

Balance

31 December

2013

Intercompany interest - assessable 12,864 1,951 - 14,815

Borrowings (1,565) (55,212) - (56,777)

Current tax assets - (2,806) - (2,806)

Property, plant and equipment (129,587) (47,753) - (177,340)

Cash and cash equivalents (209) 210 - 1

Prepayments - (428) - (428)

Inventory - (3,162) - (3,162)

Trade and other payables (5,655) (227) - (5,882)

Provisions (1,241) 1,180 - (61)

Brazil reserves - - (3,123) (3,123)

Capital raising costs (3,706) - 1,939 (1,767)

Tax losses carried forward (41,123) (50,089) - (91,212)

Deferred tax assets not recognised 170,222 156,336 1,184 327,742

- - - -

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Deferred tax assets have not been recognised in respect of the following items:

31 December

2014

31 December

2013

US$000 US$000 Unrecognised deferred balances

Temporary differences (185,951) (236,530)

Tax losses (81,321) (91,212)

(267,272) (327,742)

The tax losses do not expire under current tax legislation. Deferred tax assets have not been recognised in respect

of these items because it is not probable that future taxable profit will be available against which the Company can

utilise benefits.

15. EARNINGS PER SHARE

Basic and diluted earnings per share

The calculation of basic earnings per share of US$0.42 at 31 December 2014 (31 December 2013: US$0.56 loss per

share) was based on the profit attributable to ordinary shareholders of US$382.945 million (31 December 2013:

US$493.861 million loss) and a weighted-average number of ordinary shares outstanding during the financial year

ended 31 December 2014 of 904,342,854 (31 December 2013: 876,775,340) calculated as follows:

Basic earnings (loss) per share Diluted earnings (loss) per share

31 December

2014

31 December

2013

31 December

2014

31 December

2013

Profit/(loss) attributable to ordinary shareholders (US$000) 382,945 (493,861) 387,599 (493,861)

Issued ordinary shares at start of period 876,801,147 876,582,736 876,801,147 876,582,736

Effect of issue of shares 27,541,707 192,604 27,541,707 192,604

Effect of Senior Convertible Secured Notes - - 355,170,665 -

904,342,854 876,775,340 1,259,513,519 876,775,340

Earnings (Loss) per share in US$ dollars 0.42 (0.56) 0.31 (0.56)

Performance rights and share options on issue are not dilutive as their exercise would have the impact of decreasing

loss per share in the prior year. There were no performance rights and no share options on issue at 31 December

2014 (31 December 2013: 5,010,045 performance rights and 400,000 share options).

16. CASH AND CASH EQUIVALENTS

31 December

2014

31 December

2013

US$000 US$000

Cash at bank and on hand 11,210 13,267

Deposits 6,350 17,468

17,560 30,735

The Group’s exposure to currency risk, interest rate risk and sensitivity analysis for financial assets and liabilities are

disclosed in Note 29.

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17. TRADE AND OTHER RECEIVABLES

31 December

2014

31 December

2013

US$000 US$000

Current asset

Trade receivables 1,775 13,666

Prepayments 4,090 11,557

5,865 25,223

Non-current asset

Other receivables - 432

Prepayments 34,645 31,519

34,645 31,951

Current prepayments include payments in advance for consumables not yet delivered.

Non-current prepayments comprise certain recoverable Brazilian federal and state taxes arising from the

construction and commissioning stages of the Santa Rita operation as well as operating expenses prepayments. It is

anticipated that these taxes will be offset against future income tax payable, however, a provision of US$11.597

million has been taken up against the non-recoverable component of the State taxes.

18. INVENTORIES

31 December

2014

31 December

2013

US$000 US$000

Broken ore – at cost (2013: at NRV) 3,955 19,502

Concentrate – at cost (2013: at NRV) 29,312 15,545

Stores, spares and consumables – NRV 22,626 32,923

55,893 67,970

Stores, spares and consumables represent materials and supplies consumed in the production process. All stocks

have been calculated as the lower of cost and net realisable value, with net realisable value for broken ore stocks

and concentrate representing the estimated selling price in the ordinary course of business less any further costs

expected to be incurred in respect of such disposal. Net realisable value expense for 2014 equated to US$0.528

million.

19. DERIVATIVE FINANCIAL INSTRUMENTS

As at 31 December 2014 there were no metal and foreign exchange forward contracts designated as hedges. These

contracts were terminated during the year ended 31 December 2011. The remaining effective portion of the hedges

was recognised in the hedge reserve and is unwound to revenue upon realisation of the underlying hedge

transactions, and was fully unwound as at 31 December 2014.

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Net unwind/change in fair value of cash flow hedges transferred to profit or loss:

Unwind Unwind

31 December

2014

31 December

2013

US$000 US$000

Nickel and Copper- forward contracts 4,740 11,330

Foreign exchange - forward contracts - (1,667)

4,740 9,663

20. EXPLORATION AND EVALUATION EXPENDITURE

31 December

2014

31 December

2013

US$000 US$000

Balance at the beginning of the period 2,663 3,490

Expenditure incurred during the period - -

Transferred to construction and development in progress - (422)

Effect of movements in foreign exchange (300) (405)

Balance at the period end 2,363 2,663

The recoverability of the carrying amounts of exploration and evaluation assets is dependent upon the successful

development and commercial exploitation or sale of the respective area of interest.

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21. PROPERTY, PLANT & EQUIPMENT

31 December 2014

US$000

Plant &

equipment

Leased

assets Land

Mine

properties(a)

Construction &

development

expenditure Total

Cost

Balance at 1 January 2014 380,708 60,703 9,870 336,175 6,350 793,806

Additions 4,741 2,932 - 11,524 24,677 43,874

Rehabilitation discount and inflation

rate adjustment - - - - - -

Transfers from exploration &

evaluation expenditure - - - - - -

Transfer to stores, spares and

consumables (811) - - - - (811)

Disposals (191) (260) - - - (451)

Transfers (1,258) 1,258 - 29,103 (29,103) -

Effect of movement in exchange rates (44,806) (7,591) (1,154) (44,197) (183) (97,931)

Balance at 31 December 2014 338,383 57,042 8,716 332,605 1,741 738,487

Depreciation and Impairment

Balance at 1 January 2014 (380,708) (60,703) (9,870) (336,175) (6,350) (793,806)

Depreciation charge for the year (387) (150) - (114) - (651)

Transfers - - - (4,426) 4,426 -

Reclassification of critical spares - - - - - -

Effect of movement in exchange rates 44,527 7,107 1,154 39,858 183 92,829

Balance at 31 December 2014 (336,568) (53,746) (8,716) (300,857) (1,741) (701,628)

Net book value at 31 December 2014 1,815 3,296 - 31,748 - 36,859

(a) Mine Properties

Includes deferred stripping costs of USD$10.104 million (31 December 2013: nil).

(i) Impairment - 2014

As the Group identified impairment indicators such as the challenging nickel market conditions based on LME nickel

prices, the termination of one of the Company’s two off-take contracts (as outlined in Note 2), and a significant

change to the Group’s ore reserves and mineral resources, the Group performed an impairment test on the

recoverability of its assets using consensus analyst nickel price assumptions as at 31 December 2014.

The Group is a single asset, single commodity producer and therefore the Group as a whole was determined a cash

generating unit (CGU) for impairment purposes. The recoverable amount of the CGU was determined based on

value in use (VIU). VIU was determined using a discounted cash flow model.

The fair value of property, plant and equipment is based on the level 3 fair value hierarchy, this being unobservable

inputs.

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The basis for determination of the recoverable amount was:

Nickel price – future nickel prices were based on the quarter four 2014 consensus views from market

participants (2013: quarter four of 2013);

Nickel production – future nickel production was based on the new fourteen year life of mine model with

material movement in 2015 of 27.9Mtpa (2013: 25Mtpa in 2015);

Operating and capital cost – these costs were based on the new fourteen year life of mine model with material

movement in 2015 of 27.9Mtpa including marginal ore grade material (2013: 25Mtpa in 2015);

Foreign exchange rates – Brazilian real to US dollar exchange rates were based on quarter four 2014 (2013:

quarter four of 2013) forecast consensus views from market participants; and

Discount rate – a post–tax real discount rate of 10.20% (2013: 9.92%) based on weighted average cost of capital

of an expected market participant.

Based on the above review, the Group is of the opinion that no impairment exists for the reporting period ended 31

December 2014. However, any material negative change in the above assumptions may result in a future

impairment occurring.

(ii) Impairment - 2013

For the year ended 31 December 2013, the Group recognised an impairment charge of US$331.182 million, resulting

from factors such as continued low nickel prices and the non-recoverability of Brazilian indirect state taxes pursuant

to the change from domestic to export sales. As a result of this impairment charge the production assets of the

Group at that time were fully written down.

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31 December 2013

US$000

Plant &

equipment

Leased

assets Land

Mine

properties(a)

Construction &

development

expenditure Total

Cost

Balance at 1 January 2013 452,460 32,169 11,315 386,573 375 882,892

Additions 14,165 8,393 - 7,834 6,217 36,609

Rehabilitation discount and inflation

rate adjustment - - - (6,555) - (6,555)

Transfers from exploration &

evaluation expenditure - - - - 422 422


consumables (3,167) - - - - (3,167)

Disposals (2,071) - - - - (2,071)

Transfers (29,112) 29,173 - - (61) -

Effect of movement in exchange rates (51,567) (9,032) (1,445) (51,677) (603) (114,324)

Balance at 31 December 2013 380,708 60,703 9,870 336,175 6,350 793,806

Depreciation and Impairment

Balance at 1 January 2013 (275,353) (26,397) (5,822) (216,516) (191) (524,279)

Depreciation charge for the year (6,954) (1,754) - (6,404) - (15,112)

Impairment charge for the year (156,134) (18,240) (4,940) (145,709) (6,159) (331,182)

Transfers 20,854 (20,854) - - - -


consumables (1,982) - - - - (1,982)

Effect of movement in exchange rates 38,861 6,542 892 32,454 - 78,749

Balance at 31 December 2013 (380,708) (60,703) (9,870) (336,175) (6,350) (793,806)

Net book value at 31 December 2013 - - - - - -

22. TRADE AND OTHER PAYABLES


US$000 US$000

Trade payables 26,303 32,022

Other payables and accrued expenses 7,085 32,461

33,388 64,483

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23. PROVISIONS


US$000 US$000

Current liability

Provision for annual leave 1,940 3,094

Provision for onerous lease 88 298

2,028 3,392

Non-current liability

Provision for rehabilitation 13,166 10,093

Other provision non-current 68 151

13,234 10,244

Reconciliation of movements in provisions:

Provision for annual leave

Balance at beginning of period 3,094 3,281

Provision (reversed)/made during the financial period (804) 232


Balance at period end 1,940 3,094

Provision for onerous lease

Balance at beginning of period 298 -

Provision (reversed)/made during the financial period 298

Provision used during the financial period (185) -

Effect of movements in foreign exchange (25) -

Balance at period end 88 298

Provision for rehabilitation Balance at beginning of period 10,093 17,777

Accretion expense 1,021 1,241

Discount and inflation rate adjustment 3,138 (6,555)

Effect of movements in foreign exchange (1,086) (2,370)


Other provision non-current

Balance at beginning of period 151 -

Provision used during the financial period -

Provision (reversed)/made during the financial period (64) 162


Balance at period end 68 151

The rehabilitation provision is an estimate of the value of future costs for dismantling, demobilisation, remediation

and ongoing treatment and monitoring of the Santa Rita operation. The Group uses third parties to estimate these

costs. The estimate will be reviewed over time as the operation develops. The unwinding of the effect of

discounting on the provision is recognised as a finance cost. In addition, the rehabilitation obligation has been

recognised as an asset and will be amortised over the life of the mine. Other provisions non-current includes

indirect taxes payable which are not repayable in the next twelve months.

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24. BORROWINGS

31 December 2014

US$000

Subordinated

unsecured

notes

(i)

Senior

convertible

secured notes

(ii)

Caterpillar

finance lease

facility

(iii)

Banco

Bradesco

loan

(iv)

Atlas Copco

finance lease

facility

(v) Total

Nominal Interest Rate

1.00% 9.50% COF + LIBOR +

2.75% 6.00% + LIBOR 6.00%

Loan Term

2014 to 2044 2014 to 2019 2009 to 2015 2012 to 2018 2012 to 2015

Carrying Value 100 48,722 1,259 47,000 737 97,818

Current borrowings - - 1,259 - 737 1,996

Non-current

borrowings 100 48,722 - 47,000 - 95,822

100 48,722 1,259 47,000 737 97,818

31 December 2013

US$000

Senior

unsecured

notes

(vi)

Caterpillar

finance lease

facility

(iii)

Banco

Bradesco

loan

(iv)

Atlas Copco

finance lease

facility

(v) Total

Nominal Interest Rate

8.75% COF + LIBOR +

2.75% 6.00% + LIBOR 6.00%

Loan Term

2011 to 2018 2009 to 2015 2012 to 2014 2012 to 2015

Carrying Value 395,000 9,031 50,000 2,210 456,241

Current borrowings 395,000 9,031 50,000 2,210 456,241

395,000 9,031 50,000 2,210 456,241

(i) US$5.000 million, 1.00% subordinated unsecured notes (Subordinated Notes) due 10 September 2044 were

issued on 10 September 2014. Interest on the Subordinated Notes shall be capitalised by the Company and

added to the principal amount of the Subordinated Notes annually in arrears on 10 September of each year

during the term of the Subordinated Notes. The fair value of the Subordinated Notes was assessed at inception

at US$0.100 million, resulting in a fair value adjustment reducing the liability by US$4.900 million. This

adjustment was due to the fair value being less than the face value due to a lower interest rate than market.

(ii) US$115.000 million of 9.50% Senior Convertible Secured Notes (SCSN) due 24 June 2019 were issued on 24 June

2014. Interest on the SCSNs shall be capitalised by the Company and added to the principal amount of the

SCSNs semi-annually in arears on 24 June and 24 December of each year during the term of the SCSNs. The

amount of interest converted to SCSNs for the year ended 31 December 2014 was US$5.462 million. The SCSNs

are secured by a first ranking charge on a material part of the assets of the Group (including shares in its

subsidiaries and a material part of the assets of Mirabela Brazil).

Initial debt establishment costs of US$7.296 million were offset against the principal borrowings amount and are

amortised using the effective interest rate method. The SCSNs have been separated from the convertible note

option, which is separately disclosed at Note 25. The US$115.000 million of SCSNs initially comprised:

borrowings of US$39.107 million; convertible note option initial recognition of US$68.597 million; and initial

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debt establishment costs of US$7.296 million. These amounts will change over the life of the SCSNs as effective

interest charges and fair value adjustments occur.

The SCSNs, including the incurred interest, are convertible into the Company’s ordinary shares at the discretion

of the SCSN Holders up to the maturity date of 24 June 2019 at a conversion price of approximately US$0.1688.

The conversion ratio may be adjusted for under certain circumstances including a share split or consolidation of

shares, a rights issue at a discount, and a buy-back of shares. No SCSNs were converted into the Company’s

ordinary shares as at 31 December 2014.

The Company has the option to redeem the SCSNs, based on specified terms, on or after the third anniversary

(but before the fourth anniversary) of the issuance of the SCSNs at an interim redemption price of 106.75% of

the principal amount of the Notes, and on or after the fourth anniversary up to maturity at a final redemption

price of 100% of the principal amount of the Notes. On redemption, any principal and incurred interest will be

paid out in cash.

(iii) The US$55.000 million master funding and leasing agreement is for the purpose of lease financing of up to 90%

of the purchase price of Caterpillar mobile equipment. The facility was drawn down to US$40.795 million as at

31 December 2014, with US$1.259 million outstanding after repayments. Further drawdown under the leasing

facility will require approval from Caterpillar prior to the drawdown. Lease payments under the facility are

calculated on the basis of a 60 month term, and include interest determined at the date of the particular

funding request as the prevailing 3 month US$ LIBOR rate plus COF plus 2.75% per annum (weighted-average

interest rate of 3.93%).

(iv) During January 2012, the Company’s Brazilian subsidiary, Mirabela Mineração do Brasil Ltda (Mirabela Brazil),

entered into a US$50.000 million, 35 month working capital facility with Banco Bradesco S.A. Principal was

repayable in instalments, being 50% in month 12, and the remainder in equal instalments in months 24, 30 and

35. The Company negotiated revised repayment terms on the facility which provided for a part payment of

US$3.000 million in January 2014 and the remaining amount of the principal, by agreement dated 6 May 2014,

to be deferred to 29 March 2018. Interest remains payable bi-annually at a rate of LIBOR plus 6%. The loan is

unsubordinated and secured by a Guarantee from the Company and a fiduciary assignment on the Norilsk Nickel

or replacement off-take arrangements.

(v) The Company entered into a US$5.200 million 36 month financing facility with Atlas Copco Customer Finance

during January 2012, to finance four DML drill rigs. Down-payment of US$0.780 million was made at

commencement of the facility, with the remaining principal repayable in six semi-annual equal instalments (plus

interest at a fixed rate of 6%) commencing July 2012. US$0.737 million is outstanding after repayments as at 31

December 2014.

(vi) US$395.000 million of 8.75% Senior Unsecured Notes due 2018 were issued in the International and United

States Rule 144A debt capital markets during April 2011. The notes were guaranteed by Mirabela Investments

Pty Ltd and Mirabela Mineração do Brasil Ltda. Interest on the notes was payable semi-annually in arrears on

April 15 and October 15 of each year during the term of the notes. Borrowing costs of US$20.476 million to

secure this funding were offset against the principal borrowings amount and were amortised using the effective

interest rate method.

Resulting from the Company restructure, the Senior Unsecured Noteholder debt (Original Noteholders) and

incurred interest were extinguished on 25 June 2014 at the termination of the Deed of Company Arrangement

(DOCA). In return, the Original Noteholders became entitled to approximately 98.2% of the Company’s ordinary

shares on issue at that time (DOCA Shares). The DOCA Shares were transferred from existing shareholders of

the Company (by order of the Supreme Court of New South Wales) to a trustee who holds them as bare trustee

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for the Original Noteholders. A gain on forgiveness of the Original Noteholder debt of US$439.715 million has

been recognised (refer to Note 9).

Finance lease liabilities

The above represents contractual cash flows.

25. CONVERTIBLE NOTE OPTION


US$000 US$000

Balance at beginning of period - -

Fair value – initial recognition 68,908 -

Fair value – adjustment (61,987) -

Balance at period end 6,921 -

The option component of the Senior Convertible Secured Notes (SCSN) is classified as a derivative liability.

The value of the derivative fluctuates with the Company’s underlying share price and the difference in the

Company’s share price between date of inception and 31 December 2014 is reflected in the fair value movement.

An increase in the share price of the Company increases the convertible note option liability. The decrease in the

Company’s share price since inception has resulted in a fair value gain.

As the SCSNs are denominated in United States dollars (USD) and convertible into equity at a fixed USD price, the

change in the exchange rate with the Australian dollar (AUD) is also taken into account in deriving the fair value

movement during the period. A weakening in the USD:AUD exchange rate increases the convertible note option

liability. The strengthening in the USD:AUD exchange rate since inception has also contributed to the fair value gain.

The date of inception of the convertible note option was 24 June 2014.


US$000

Future

minimum lease

payments Interest

Present value

of minimum

lease

payments

Future

minimum lease

payments Interest

Present value

of minimum

lease

payments

Less than one year 2,032 36 1,996 9,656 383 9,273

Between one and five years - - - 2,007 39 1,968

2,032 36 1,996 11,663 422 11,241

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The fair value of the convertible note option was determined using the Black Scholes option pricing model with the

following key variables:

Key Variables

US$ 31 December 2014 (3)

24 June 2014

Fair value at measurement date $6.921 million $68.908 million

Share price $0.0238

(2) $0.1379

(1)

USD:AUD exchange rate 0.8194: 1 0.9398:1

Exercise price $0.1688 $0.1688

Exercise date 24 June 2019 24 June 2019

{maturity date of the SCSNs)

Risk-free interest rate 3.04% 3.04%

{based on 5 year Australian government bonds}

Expected volatility 100% 100%

{based on historic volatility adjusted for abnormal share price spikes}

(1) Based on an average 23 day VWAP, as this represented a more stabilised period for the share price. (2) Based on the last traded share price before 31 December 2014. (3) 31 December 2014 figures include additional convertible note options of 32,360,782 relating to the compounded interest on the Senior Convertible Secured Notes.

26. RELATED PARTIES

Key management personnel remuneration

Remuneration paid to key management personnel (KMP) is as follows:

31 December

2014

31 December

2013

US$000 US$000

Short-term employee benefits 3,096 3,053

Post-employment benefits 54 86

Equity compensation benefits 213 348

Non-monetary benefits 138 37

3,501 3,524

Key management personnel remuneration disclosures and other transactions

Information regarding KMP remuneration and equity instruments disclosures, as required by Corporations

Regulations 2M.3.03, is provided in the Remuneration Report in section 3 of the Directors’ Report.

Apart from the details disclosed in this note or in the Remuneration Report, no director has entered into a material

contract with the Group since the end of the previous financial period and there were no other material contracts

involving directors’ interests existing at the reporting date.

KMPs, or their related parties, may hold positions in other entities that result in them having control or significant

influence over the financial or operating policies of those entities. The terms and conditions of the transactions with

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KMPs and related parties were no more favourable than those available, or which might reasonably be expected to

be available, on similar transactions to non-related entities on an arm’s length basis.

During the year ended 31 December 2014 there were no transactions between the Company and the KMPs or any

other related parties (year ended 31 December 2013: None).

27. CONTRIBUTED EQUITY

Number of Securities Value

31 December

2014

31 December

2013

31 December

2014

31 December

2013

US$000 US$000

Net ordinary shares 929,710,216 876,801,147 803,813 796,517

929,710,216 876,801,147 803,813 796,517

Movement in share capital for the year ended 31 December 2014

Ordinary shares Number of shares Issue price(2)

US$

1 January 2014 Opening balance 876,801,147

796,516,913

24 June 2014 Shares issued as Fee Shares(1)

34,532,547 0.1379 4,762,038

24 June 2014 Shares issued as Rollover Shares (1)

18,376,522 0.1379 2,534,122

30 June 2014 Closing balance 929,710,216 803,813,073

(1) The Senior Convertible Secured Notes (SCSN) Holders were issued 52,909,069 new ordinary shares in the Company on 24 June 2014 in accordance with the terms of the recapitalisation as follows:

34,532,547 ordinary shares were issued to the new capital parties subscribing to the US$55.000 million of SCSNs (Fee Shares); and

18,376,522 ordinary shares were issued to the Syndicated Note Subscription Deed (SNSD) lenders for rolling over the SNSD debt (US$45.000 million) and incurred interest & fees (US$15.000 million) into the SCSNs (Rollover Shares).

(2) Issue price is based on the derivative option value share price calculated as at 24 June 2014.

Movement in share capital for the year ended 31 December 2013

Ordinary shares

Number of

shares

Issue

price US$

January 1, 2013 Opening balance 876,582,736

797,110,316

January 23, 2013 Shares issued on conversion of performance rights

(Issued at A$1.84) (1)

182,358

-

-

May 31, 2013 Shares issued on conversion of performance rights

(Issued at A$0.98) (1)

36,053 - -

December 31, 2013 Closing balance 876,801,147 797,110,316

Less: Share issue cost – prior period(2)

- (593,403)

876,801,147 796,516,913

(1) Performance rights converted to shares not for cash. (2) Represents costs relating to the prior period equity raisings.

Weighted average number of shares

Year

ended

31 December 2014

Year

ended

31 December 2013

Weighted basic average number of shares outstanding (000’s) 904,343 876,775

Weighted diluted average number of shares outstanding (000’s) 1,259,514 876,775

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Unissued Shares under Performance Rights at 31 December 2014

Vesting date

Number of

Performance Rights

31 December 2013 482,263

Balance 482,263





however, on 10 January 2014, the previous Committee suspended these performance rights from being converted

into shares.

Unissued Shares under Performance Rights at 31 December 2013

Vesting date

Number of

Performance Rights

31 December 2013 482,263

31 December 2015(1)

4,527,782

Balance 5,010,045

(1) Performance rights granted pursuant to the “2013 Mirabela Nickel Limited Long Term Incentive Plan” (LTI), approved by shareholders on 30 May 2013, were subsequently cancelled by the previous Committee on 10 January 2014.

Unissued shares under Options at 31 December 2014


were unexercised and as a result have expired. There were no options outstanding as at 31 December 2014. (31

December 2013: 400,000).

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28. RESERVES

31 December

2014

31 December

2013

US$000 US$000

Share based payments reserve 5,590 5,590

Translation reserve (154,201) (125,715)

Hedge reserve - (4,740)

(148,611) (124,865)

Reconciliation of movement in reserves:

Share based payments reserve

Balance at beginning of period 5,590 7,186

Options lapsed during the period(1)

- (1,704)

Performance rights cancelled during the period (328) (512)

Equity-settled share based payment transactions 328 620


Translation reserve

Balance at beginning of period (125,715) (115,379) Effect of translation of foreign currency operations to Group presentation currency (28,486) (10,336)

Balance at period end (154,201) (125,715)

Hedge reserve

Balance at beginning of period (4,740) (14,403)

Net change in fair value of cash flow hedges transferred to profit or loss 4,740 9,663

Balance at period end - (4,740)

(1) This represents the reversal of options previously expensed. This amount was transferred from reserves to retained earnings.

Share based payments reserve

The share based payments reserve represents the value of performance rights and options issued under the

remuneration arrangement that the Group is required to disclose in the consolidated financial statements. No gain

or loss is recognised in the profit or loss on the purchase, sale, issue or cancellation of the Group’s own equity

instruments.

Translation reserve

The translation reserve comprises all foreign exchange differences arising from the translation of the financial

statements of the Group where the functional currencies are different to the presentation currency for reporting

purposes, including the translation of liabilities that hedge the Group’s net investment in a foreign subsidiary.

Hedge reserve

The hedge reserve comprises the effective portion of the cumulative net change in the fair value of cash flow

hedging instruments related to hedged transactions that have not yet occurred. As at 31 December 2014 there were

no metal and foreign exchange forward contracts designated as hedges. These contracts were terminated during the

year ended 31 December 2011. The remaining effective portion of the hedges was recognised in the hedge reserve

and is unwound to revenue upon realisation of the original underlying hedged transactions.

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29. FINANCIAL INSTRUMENTS

FINANCIAL RISK MANAGEMENT

The Group has exposure to credit risk, liquidity risk and market risk arising from its financial instruments.

The Group’s management of financial risk is aimed at ensuring net cash flows are sufficient to meet all of its financial

commitments and maintain the capacity to fund the Santa Rita operation and ancillary exploration activities.

Market, liquidity and credit risks (including foreign exchange, commodity price, interest rate and counterparty risk)

arise in the normal course of business. These risks were managed under the Board approved treasury processes and

transactions.

The principal financial instruments as at the reporting date include receivables, payables, convertible notes (and the

related option derivative), loan and finance agreements and cash.

This note presents information about exposures to the above risks, the objectives, policies and processes for

measuring and managing risk, and the management of capital.

Refer to Note 2 for further details regarding financial risk.

Credit risk

Credit risk is the risk of financial loss if a customer or counterparty to a financial instrument fails to meet its

contractual obligations, and arises principally from the Group’s customers.

For the Group, the exposure to credit risk is influenced by the characteristics of the two customers (refer to Note 6).

During the financial year, all of the Group’s sales were to a large mining company located in Russia and to a

reputable international trading house (ITH). Credit exposure is limited by ensuring that customers abide by the off-

take agreements, which stipulate the payment terms that 90% of the invoice value is settled from 7 - 70 days after

the month of sale and 10% of the invoice is settled within 15 days of presentation of the final invoice. ITH are in

compliance with the payment terms defined in their specific off-take agreement.





Apart from sales arrangements, the Group has limited its exposure to credit risk by investing and transacting with

banks that hold investment grade credit ratings.

Exposure to credit risk

The carrying amount of the Group’s financial assets represents the maximum credit exposure of the Group. The

Group’s maximum exposure to credit risk at the reporting date was:

Carrying Amount

31 December

2014

31 December

2013

Note US$000 US$000

Trade and other receivables (excludes prepayments) 17 1,775 14,098

Cash and cash equivalents 16 17,560 30,735

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Liquidity risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. For the year

ended 31 December 2014, the Group’s approach to managing liquidity was to ensure, as far as possible, that it

always had sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without

incurring unacceptable losses or risking damage to the Group’s reputation (also refer to Note 2 and Note 3(e)).

The following are the contractual maturities of financial liabilities, including estimated interest payments and

excluding the impact of netting agreements as at period end:

31 December 2014

US$000

Carrying

Amount

Contractual

cash

outflows

6 months

or less

6-12

months 1-2 years 2-5 years

More

than 5

years

Non-derivative financial liabilities

Subordinate unsecured notes 100 6,807 - - - - 6,807

Senior convertible secured notes 48,722 182,910 - - - 182,910 -

Caterpillar finance lease facility 1,259 1,284 1,284 - - - -

Bradesco loan 47,000 57,027 1,465 1,434 5,726 48,402 -

Atlas Copco finance lease facility 737 759 759 - - - -

Trade and other payables 33,388 32,388 32,388 - - - -

131,206 281,175 35,896 1,434 5,726 231,312 6,807

31 December 2013

US$000

Carrying

Amount

Contractual

cash

outflows

6 months

or less

6-12

months 1-2 years 2-5 years

More

than 5

years

Non-derivative financial liabilities

Senior unsecured notes(2)

395,000 567,812 34,562 17,281 69,125 446,844 -

Caterpillar finance lease facility(2)

9,031 9,360 4,258 3,816 1,286 - -

Bradesco loan(2)

50,000 53,065 18,301 34,764 - - -

Atlas Copco finance lease facility(2)

2,210 2,342 803 780 759 - -

Trade and other payables 64,483 38,430 (1)

38,430 - - - -

520,724 671,009 96,354 56,641 71,170 446,844 - (1) Contractual cash outflows relating to trade and other payables are lower than its carrying amount as the difference relates to the accrued interest which has been

reflected in the cash outflows of the respective borrowings. (2) The Group’s various debts were under standstill/waiver arrangements at 31 December 2013. As these arrangements did not extend beyond one year from the

balance sheet date, all of these debts were reclassified as current for the financial period ended 31 December 2013.

Market risk

Market risk is the risk that changes in market conditions, such as commodity prices, foreign exchange and interest

rates will affect the Group’s income or the value of its holdings of financial instruments. Market risk management is

to manage and control market risk exposures within acceptable parameters, whilst optimising the return.

The Group is exposed to fluctuations in metal prices (principally nickel and copper), fluctuations in foreign currency

and interest rates, in each case in relation to its future operational cash flows and its ability to service existing and

planned borrowings for the Santa Rita operation.

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The Group is exposed to commodity price risk arising from revenue derived from forecast future metal sales. The

Group sells its products at a price effectively determined through trading on the London Metal Exchange (a major

commodity exchange).

The Group is constantly monitoring commodity prices and foreign exchange movements. The Group had no hedge

position at or since the year end.

In 2014 the Group earned approximately 100% of its nickel sales revenue in US dollars . In addition, the Group holds

approximately 62% of the cash balance at year end in US dollars denominated bank accounts to help mitigate

exchange rate risk.

The interest rate on the Banco Bradesco loan is linked to the floating LIBOR rate. The Group has elected not to

actively manage this interest rate.

Exposure to currency risk

The Group’s exposure to foreign currency risk at the reporting date was as follows, based on notional amounts:

31 December 2014

Foreign Currency USD BRL AUD

USD equivalent Note US$000 US$000 US$000 Total

Cash 16 10,812 5,511 1,237 17,560

Trade and other receivables 17 - 1,452 323 1,775

Borrowings 24 (97,818) - - (97,818)

Trade and other payables 22 (998) (31,674) (716) (33,388)

Balance sheet exposure (88,004) (24,711) 844 (111,871)

31 December 2013

Foreign Currency USD BRL AUD CAD

USD equivalent Note US$000 US$000 US$000 US$000 Total

Cash 16 52 21,723 8,959 1 30,735

Trade and other receivables 17 8,521 5,226 351 - 14,098

Borrowings 24 (456,241) - - - (456,241)

Trade and other payables 22 (26,054) (37,739) (690) - (64,483)

Balance sheet exposure (473,722) (10,790) 8,620 1 (475,891)

The following significant exchange rates (US$1.00) applied during the period:

Average rate Year end date spot rate

31 December

2014

31 December

2013

31 December

2014

31 December

2013

R$ 2.3536 2.1576 2.6562 2.3426 A$ 1.1077 1.1137 1.2204 1.1187 C$ 1.1044 1.0644 1.1537 1.0633

Sensitivity analysis

A 10 per cent strengthening of the US dollar against the following currencies at 31 December 2014 would have

increased/ (decreased) profit or loss by the amounts shown below. This analysis assumes that all other variables, in

particular interest rates, remain constant. The analysis is performed on the same basis for the period ended 31

December 2013.

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The following table shows the increase/(decrease) in profit or loss:

US$000 Profit or loss

31 December 2014

R$ 2,246

A$ (77)

C$ -

31 December 2013

R$ 1,139

A$ 862

C$ -

A 10 per cent weakening of the US dollar against the above currencies at 31 December would have had the equal but

opposite effect on the above currencies to the amounts shown above, on the basis that all other variables remain

constant.

INTEREST RATE RISK

At the reporting date the interest rate profile of the Group’s interest-bearing financial instruments was:

Carrying Amount US$000

31 December

2014

31 December

2013

Variable rate instruments

Financial assets 17,560 30,735

Financial liabilities (48,996) (61,241)

(31,436) (30,506)

Cash flow sensitivity analysis for variable rate instruments

A change of 100 basis points in interest rates at the reporting date would have increased/(decreased) equity and

profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular foreign

currency rates, remain constant. The analysis is performed on the same basis for the period ended 31 December

2013.

Profit or loss Equity

US$000 100bp

Increase

100bp

decrease

100bp

increase

100bp

decrease

31 December 2014

Variable rate instruments (314) 314 - -

Cash flow sensitivity (net) (314) 314 - -

31 December 2013

Variable rate instruments (305) 305 - -

Cash flow sensitivity (net) (305) 305 - -

FAIR VALUES

Fair values versus carrying amounts

The fair values of financial assets and liabilities, together with the carrying amounts shown in the consolidated

statement of financial position, are as follows:

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Consolidated 31 December 2014 31 December 2013

US$000 Note

Carrying

amount Fair value

Carrying

amount Fair value

Trade and other receivables 17 40,510 40,510 57,174 57,174

Cash and cash equivalents 16 17,560 17,560 30,735 30,735

Senior unsecured notes 24 - - (395,000) (395,000)

Subordinated unsecured notes 24 (100) (100) - -

Senior convertible secured notes 24 (48,722) (48,722) - -

Convertible note derivative 25 (6,921) (6,921) - -

Caterpillar finance lease facility 24 (1,259) (1,259) (9,031) (9,031)

Bradesco loan 24 (47,000) (47,000) (50,000) (50,000)

Atlas Copco finance lease facility 24 (737) (737) (2,210) (2,210)

Trade and other payables 22 (33,388) (33,388) (64,483) (64,483)

(80,057) (80,057) (432,815) (432,815)

The basis for determining fair values is further disclosed in Note 5.

CAPITAL MANAGEMENT

For the year ended 31 December 2014, the Group’s policy in managing capital was to ensure that the Group

continued as a going concern, and that its capital base was sufficiently strong so as to maintain investor, creditor and

market confidence and to sustain future development of the business. The objective was to maintain a level of debt

finance, determined according to prevailing commercial conditions, that provides a balance between adequate

funding and appropriate gearing.

The capital base is considered to include the total equity plus borrowings (“total capital”) of the Group, which as at

31 December 2014, stood at US$88.823 million. In determining the funding mix of debt and equity, consideration

was given to the relative impact of the gearing ratio on the ability of the Group to service loan interest and

repayment schedules and also to generate adequate free cash available for corporate and exploration activities. The

tenure of the debt profile was also considered in determining the gearing ratio. The Group’s debt to total assets

ratio as at 31 December 2014 was 64% (31 December 2013: 288%).

30. CONTINGENT LIABILITIES

There are no contingent liabilities as at 31 December 2014 (31 December 2013: Nil).

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31. CAPITAL AND OTHER COMMITMENTS


US$000 US$000

Operating lease commitments

Non-cancellable operating lease rentals:

Within one year 477 745

One year or later and no later than five years 5 1,185

482 1,930

Exploration expenditure commitments

Commitments for rental fees under exploration licence agreements:


One year or later and no later than five years 3 -

Greater than five years 1 -

568 902

Contractual, capital and operating commitments

Contracted but not provided for and payable:

Within one year 27,264 36,784

One year or later and no later than five years 3,987 31,582

Greater than five years 244 1,479

31,495 69,845

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32. RECONCILIATION OF CASH FLOWS FROM OPERATING ACTIVITIES


US$000 US$000

Cash flows from operating activities

Profit/(loss) for the year 382,945 (493,861)

Adjustments for:

Impairment of property, plant & equipment - 331,182

Change in fair value of convertible note option (61,987) -

Net foreign exchange (gain)/loss (19,346) 34,582

Depreciation and amortisation expense 651 15,112

Interest expense 35,024 49,028

Provision for rehabilitation – discount & inflation rate adjustment 3,138 -

Restructuring expenses 14,872 -

Subordinated notes expense 100 -

Debt forgiveness income (439,715) -

Net unwind of cash flow hedges to profit or loss 4,740 9,663

Equity-settled share based payments expense 328 620

Inventory and critical spares write-off - 5,540

Operating loss before changes in working capital (79,250) (48,134)

Decrease/(increase) in trade and other receivables 16,664 16,835

(Increase)/decrease in inventories 12,077 (16,618)

Increase/(decrease) in trade and other payables (7,374) 18,477

(Decrease)/increase in tax liabilities 8,791 -

(Decrease)/increase in provisions (2,533) (8,664)

Cash used in operating activities (51,625) (38,104)

Interest received 1,327 5,070

Taxes paid - -

Net cash used in operating activities (50,298) (33,034)

33. CONSOLIDATED ENTITIES

Ownership interest

Name of entity

Country of

incorporation Class of shares

31 December 2014

%

31 December 2013

%

Parent entity

Mirabela Nickel Limited

Australia Ordinary

Subsidiaries

Mirabela Mineração do Brasil Ltda Brazil Ordinary 100 100

Mirabela Investments Pty Limited Australia Ordinary 100 100

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34. PARENT ENTITY DISCLOSURES

As at, and throughout, the financial year ended 31 December 2014 the parent entity of the Group was Mirabela

Nickel Limited.

31 December 2014

US$000

31 December 2013

US$000

Result of parent entity

Profit/(loss) for the year 414,856 (444,511)

Other comprehensive income 66,954 109,048

Total comprehensive (expense)/income for the period 481,810 (335,463)

31 December

2014

31 December

2013

US$000 US$000

Financial position of parent entity at period end

Current assets 12,833 12,532

Total assets 12,836 12,532

Current liabilities 917 420,879

Total liabilities 65,658 420,879

Total equity of the parent entity comprising of:

Contributed equity 805,521 796,517

Translation reserve (21,295) 47,720

Share based payments reserve 15,141 14,460

Accumulated losses (852,189) (1,267,044)

(52,822) (408,347)

Parent entity capital and other commitments

31 December

2014

31 December

2013

US$000 US$000

Operating lease commitments

Non-cancellable operating lease rentals are payable as follows:


One year or later and no later than five years 5 1,185

378 1,930

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35. SUBSEQUENT EVENTS

Offtakes





An offtake agreement has been entered into with an international trading house (ITH) on 30 January 2015 for

approximately 80% of the Group’s forecast range for 2015 nickel concentrate production.

Mine Plan

The Board approved the Company’s new Mine and Business Plan for 2015 (the Mine Plan), as referred to in Note 2,

on 10 February 2015. The Mine Plan focuses on streamlining operations and reducing production unit costs. The

Mine Plan targets optimising near-term cash flows given the low and volatile nickel price environment. Production

levels to-date have improved in line with the Mine Plan.

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103

1. Corporate Governance at Mirabela

The board of directors of Mirabela (Board) is committed to effective corporate governance to improve company

performance, enhance corporate social responsibility and benefit all stakeholders. Accordingly, the Board has

established, and the Company adheres to, a number of codes, policies and charters to ensure that these intentions

are met and shareholders are fully informed about the affairs of the Company.

This Corporate Governance Statement, dated 24 March 2015 and approved by the Board on 26 March 2015,

summarises the key corporate governance principles and practices of the Company.

It is noted that on 25 February 2014 the Company entered voluntary administration, with the Board appointing

Korda Mentha as its administrators. On 13 May 2014, the creditors of Mirabela Nickel Limited resolved to enter into

a deed of company arrangement (DOCA) to give effect to a proposed restructure and recapitalisation. Upon

completion of the restructure and recapitalisation in June 2014, the Deed Administrators retired, the DOCA was

terminated in accordance with its terms and the day to day management and control of Mirabela reverted to the

Company’s newly appointed board of directors. The Company re-listed on the Australian Securities Exchange (ASX)

on 30 June 2014.

The Company has developed its corporate governance policies and practices based on the recommendations made

by the Australian Securities Exchange (ASX) Corporate Governance Council’s Corporate Governance Principles and

Recommendations.

The ASX Listing Rules require the Company to report on the extent to which it has followed the Corporate

Governance Recommendations contained in the ASX Corporate Governance Councils (ASX CGC) 2nd

Edition of its

Corporate Governance Principles and Recommendations. For the Reporting Period, the Board considers that the

Company has followed those ASX Recommendations which are relevant to the Company’s size and complexity.

Where the Company has not complied with a recommendation this is identified, with the reasons for not following

the recommendation specified, in accordance with ASX Listing Rule 4.10.3.

The ASX Corporate Governance Council released its 3rd

Edition of Corporate Governance Principles and

Recommendations in March 2014 (3rd

Edition Recommendations). While the Company is not required to measure

its governance practices against the 3rd

Edition Recommendations until the financial year ended December 2015, the

Company has undertaken a comprehensive review of its corporate policies and practices in light of the 3rd

Edition

Recommendations. Where necessary, amendments have been made to the Company’s policies to ensure

compliance with the 3rd

Edition Recommendations. The Board adopted the revised policies on 25 August 2014 and

on 8 January 2015 and is in the process of implementing any necessary changes to its governance practices to ensure

compliance by December 2015.

The Company’s Board regularly reviews and, as required, refines its corporate governance codes, policies and

charters to ensure that appropriate corporate governance systems are in place and aligned with the Company’s

overall strategy and growth, current Australian legislation, and good governance practices.

The corporate governance section on the Company’s website at http://mirabela.com.au/governance.asp includes

details on the Company’s corporate governance practices and copies of relevant policies and charters.

2. Board of Directors

2.1 Role of the Board and Management

The primary role of the Board is to oversee the activities of the Company and its subsidiaries (Group) for the benefit

of its shareholders, employees and other stakeholders.

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The Board assumes responsibility for the stewardship and overall direction, management and corporate governance

of the Company and its subsidiaries (Group). The roles and responsibilities of the Board are formalised in the Board

Charter, which defines in detail the matters that are reserved for the Board and its committees, and those that the

Board has delegated to management.

The Board Charter was reviewed and amendments approved by the Board on 8 January 2015. The Board Charter is

posted to the corporate governance section of the Company’s website.

Responsibility for the day-to-day management of the Company is delegated by the Board to the Chief Executive

Officer/Managing Director (Managing Director), who is accountable to the Board. The Managing Director manages

the Company in accordance with the corporate objectives, strategy, plans and policies approved by the Board. The

Board has determined that the Managing Director is appropriately qualified and experienced to discharge the

required responsibilities.

Formal letters are provided to directors, setting out the key terms and conditions of their appointment. The

Managing Director, Chief Financial Officer and Company Secretary and other key management personnel also have

formal contracts of appointment setting out key terms of their roles, duties, rights and responsibilities and

entitlements on termination.

2.2 Board composition

As at the commencement of the Company’s 2014 financial year, the Board was comprised of five non – executive

directors (Geoff Handley, Colin Steyn, Peter Nicholson, Ian McCubbing and Nicholas Sheard) and one executive

director (Ian Purdy). On 11 January 2014 Geoff Handley, Colin Steyn and Peter Nicholson resigned as Directors. On 7

April Ian McCubbing and Nicholas Sheard resigned as directors and on 5 May 2014 Ian Purdy resigned.

Prior to the Company’s reinstatement to official quotation on the ASX on 30 June 2014, a new Board of directors was

established, comprising three non-executive directors (Mr Ross Griffiths, Mr Richard Newsted and Mr Mark Milazzo)

and one executive director (Ms Maryse Bélanger), with Mr Alastair McKeever subsequently appointed as a non-

executive director on 6 August 2014 (Current Directors). Further details of the directors who held the position

during the past financial year are set out in Section 1.1 of the Directors’ Report. The Directors’ Report includes

information on the directors’ qualifications, experience, date of appointment and independent status.

The skill set of the Current Board consists of members with detailed knowledge and experience of mineral

exploration and mining operations as well as financial and commercial expertise (see Section 1.1 of the Directors’

Report), all critical skills required by the Board in pursuing the Company's business plan at this stage of its life cycle.

In addition, each director is charged with having a thorough understanding of, and responsibility for, the protection

of the rights of the Company and its stakeholders. The Board is currently satisfied that it has the required skills

necessary to fulfil its duties. The Board is in the process of preparing a board skills matrix setting out the mix of skills

and diversity that the Board seeks to achieve in its membership.

2.3 Chairman

The Chairman is appointed by the directors of the Board. It is the Company’s policy that the Chairman and Managing

Director is not the same individual, and that the Chairman is an independent director. The Chairman is responsible

for chairing Board and Company meetings, providing leadership to the Board and the Group, overseeing shareholder

communications, and ensuring that there are procedures and processes in place to evaluate the Board, its

committees and individual directors and that these evaluations are conducted. The Board has developed a written

position description for the Chairman which is summarised in the Company’s Board Charter.

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At the commencement of the 2014 financial year, Mr Geoff Handley was the Chairman of the Board. Upon Mr

Handley’s retirement in January 2014, Mr Ian McCubbing assumed the role of Chairman on 11 January 2014 and

retired on 7 April 2014. Both Mr Handley and Mr McCubbing were independent, non – executive directors.

Mr Richard Newsted assumed the role of the Chairman of the Board in June 2014. In accordance with ASX

Recommendation 2.2, Mr Newsted is an independent, non- executive director.

2.4 Director independence

The Board assesses the independence of a director prior to appointment, and of all appointed directors, as

appropriate. When assessing the independence of a director the Board has regard to the independence criteria set

out in the ASX Corporate Governance Council’s Principles and Recommendations. The Board reviews the

independence of each Director on an on-going basis in light of interests disclosed to the Board. If the Board’s

assessment of a director’s independence changes, then the change is disclosed to the market.

Directors are to inform the Chairman prior to accepting any new appointment to the board of any other entity.

ASX Recommendation 2.1 requires that a majority of the Board should be independent directors.

At the commencement of the Company’s 2014 financial year, and prior to entering into voluntary administration,

four of the six Company directors were considered to be independent. Mr Colin Steyn was not considered to be

independent due to his direct association with Lancaster Park, which until 31 January 2014 held 5.4% shareholding in

the Company, making it a substantial shareholder within the definition of the Corporations Act. On 31 January 2014

Lancaster Park ceased to be a substantial shareholder of the Company.

Mr Peter Nicholson was an employee at Resource Capital Funds Management Pty Ltd, which is a subsidiary of the

entity that manages Resource Capital Fund V L.P. (RCF-V). RCF-V beneficially owned 18.3% of the voting rights in the

Company. The previous Board considered the independence of Mr Nicholson and concluded that Mr Nicholson’s

indirect relationship with RCF-V and his inability to exert any control over RCF-V meant that he was considered by

the Board to be an independent director in accordance with ASX Recommendation 2.1.

Mr Ian Purdy was not independent as he was an executive of the Company in the role of Managing Director.

Of the five Current Directors, three are considered to be independent.

Mr Alastair McKeever is a research team leader at Guggenheim Partners Investment Management. Guggenheim

Partners and its associates beneficially own a substantial shareholding (>5%) of the Company’s voting rights and,

therefore, Mr McKeever is not considered to be independent within the definition of independence set out in ASX

Recommendation 2.1.

Ms Maryse Bélanger is not independent as she is an executive of the Company in the role of Managing Director.

Accordingly, during 2014 the Company was in compliance with ASX Recommendation 2.1.

2.5 Conflicts of interest

In accordance with the Corporations Act 2001 (Cth), the Company’s constitution and the Company’s Code of Conduct

and Ethics, directors must keep the Board advised, on an ongoing basis, of any interest that could potentially conflict

with those of the Company. Where the Board believes that a significant conflict exists, the director concerned is not

present at the meeting whilst the item is being considered.

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2.6 Board performance

As at the end of 2014, the Board had not conducted a formal performance review. This is due to the relatively short

time that the Current Directors have been in office, and the fact that the Company was in voluntary administration

during the first half of 2014. The Board intends to conduct a performance review of the Board, its individual

members and its Committees during the 2015 financial year.

2.7 Performance evaluation of senior executives

The Remuneration and Nomination Committee develops and recommends to the Board the process for evaluating

the performance of the Company’s senior management team, and ensures that performance of senior executives is

regularly reviewed by the Board. The Board evaluates the performance of senior executives by reviewing the

achievement of key strategic outcomes set by the Board against measurable and qualitative indicators and fulfilment

of the senior executives' responsibilities and duties. The results of the performance review for 2014 are included in

the audited Remuneration Report in Section 3 of the Directors’ Report.

2.8 Remuneration

The Remuneration and Nomination Committee is responsible for determining and reviewing compensation

arrangements for the directors, the Managing Director and executives.

It is the Company’s objective to provide maximum stakeholder benefit from the retention of a high-quality Board

and executive team by remunerating directors and key executives fairly and appropriately with reference to relevant

employment market conditions.

For details on the amount of remuneration for all directors refer to the Remuneration Report in Section 3 of the

Directors’ Report.

In relation to the payment of bonuses and allocation of performance rights to executives, the Remuneration &

Nomination Committee considers the overall performance of the Company and the performance of the individual

during the period and recommends to the Board the incentive payments payable to executives in accordance with

the Company’s Short Term and Long Term Incentive Plans.

2.9 Non–executive directors’ remuneration

Remuneration of non-executive directors is determined by the Board with reference to comparable industry levels

and, specifically for directors' fees, within the maximum amount approved by shareholders.

ASX Recommendation 8.2 contains guidelines that non-executive directors’ remuneration should be different to that

of executives, should normally be remunerated by fixed fees and that non-executive directors should not receive

security based remuneration or bonus payments. The Company is in compliance with this ASX Recommendation.

There is no scheme to provide retirement benefits, other than statutory superannuation, to non-executive directors.

Details of the non-executive directors’ fees are disclosed in the Remuneration Report in Section 3 of the Directors’

Report.

2.10 Retirement and re-election

The Company’s constitution provides that the directors of the Company must be elected and retire in rotation, with

one third of directors (excluding the Managing Director and rounded down to the nearest whole number) retiring

and being eligible for re-election at each Annual General Meeting.

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2.11 Board access to information and professional advice

Each director has the right of access to all relevant Company information and, subject to prior consultation with the

Chairman, may seek independent professional advice from a suitably qualified advisor at the Company's expense.

2.12 Terms, induction and director education

The Company provides new directors with an information pack consisting of an appointment letter, Company

Constitution, Board Charter, corporate governance policies, including a Securities Trading Policy, Continuous

Disclosure Policy, Code of Conduct and Ethics, Risk Management Policy, Audit Committee Charter and Remuneration

and Nomination Committee Charter together with other information about the Company

Directors are expected to maintain the skills required to discharge their duties as directors of the Company. All

directors are encouraged to participate in industry conventions and forums, and continuing education opportunities

to update and enhance their skills and knowledge.

2.13 Board meetings

Board meetings are scheduled to be held at least six times a year. During 2014, additional meetings were convened

as circumstances warranted. Details of the number of Board meetings held and attendance at those meetings is set

out in the Directors report. The agenda for meetings is prepared in conjunction with the Chairman and Company

Secretary and is circulated in advance. The independent directors confer at least annually without management and

non-independent directors present. During the 2014 financial year the independent directors held one such

meeting.

3. Board Committees

The Board has established two standing committees to assist the Board in discharging its responsibilities. These

committees are:

Audit and Risk Committee; and

Remuneration and Nomination Committee.

3.1 Audit and Risk Committee

The Audit and Risk Committee is appointed and authorised by the Board to assist the Board in fulfilling certain of its

statutory, fiduciary and regulatory responsibilities. The Audit and Risk Committee is responsible for the oversight of

the integrity of the accounting and financial statements and financial reporting processes of the Group, the Group’s

external audit processes as well as the Group’s system of risk management and internal control. In particular, the

Audit and Risk Committee undertakes the functions of an audit committee as set out in the ASX Recommendations.

In accordance with ASX Recommendations the Audit and Risk Committee currently comprises three non-executive,

independent directors, Mr Griffiths, Mr Newsted and Mr Milazzo. The Audit and Risk Committee is chaired by Mr

Griffiths (who is an independent director and is not the chair of the Board). Further details of the qualifications of

the Audit and Risk Committee Members, the number of meetings held and attendance at those meetings can be

found in the Directors Report.

The Audit and Risk Committee operates under a charter approved by the Board and reports to the Board on all

matters relevant to the Committee's role and responsibilities. The Audit Committee Charter which governed the

Committee during 2014 was adopted in early 2012. In late 2014 the Audit Committee Charter was reviewed and a

decision was made to include risk management with the Audit Committee. The Audit and Risk Committee Charter

was then adopted by the Board on 8 January 2015 and is available on the corporate governance section of the

Company’s website.

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The Audit and Risk Committee reviews the effectiveness of the Company’s financial reporting and internal control

policies and its procedures for the identification, assessment, reporting and management of risks. The Audit and

Risk Committee oversees and appraises the quality of the external audit and the internal control procedures

including financial reporting and practices, business ethics, policies and practices, accounting policies, and

management and internal controls.

The Audit and Risk Committee meets with the Company's external auditors before finalisation of any audit or review,

and makes recommendations to the Board. The Audit and Risk Committee keeps under review the Company’s

relationship with the external auditors, including review of the auditor’s independence, planning and results of the

external audit and assessment of the auditor’s performance, and rotation of the audit engagement partner. The

Audit and Risk Committee approves all non-audit services to be provided to the Company by its external auditors.

The external auditor reports directly to the Audit and Risk Committee and is accountable to the Audit and Risk

Committee.

The Audit and Risk Committee recommended to the Board that the financial reports for the period ended 31

December 2014 be approved. The Board has approved the Company's financial reports for the period ended 31

December 2014 and authorised a statement that they present a true and fair view, in all material respects, of the

Company's financial condition and operational results and are in accordance with relevant accounting standards.

3.2 Remuneration and Nomination Committee

The Remuneration and Nomination Committee assists the Board in fulfilling its corporate governance responsibilities

in regard to remuneration and nomination matters, including Board appointments, re-elections, performance

evaluation, succession planning, diversity obligations, provision of training and development opportunities for

directors.

The Remuneration and Nomination Committee operates under a charter approved by the Board, which amongst

other things, describes the process by which the Board identifies new candidates for Board nomination and the

powers and responsibilities of the Remuneration and Nomination Committee. The Remuneration and Nomination

Committee Charter which governed the Remuneration and Nomination Committee in 2014 was adopted in early

2012. It was reviewed and revised in late 2014, and adopted by the Board on 8 January 2015. A copy of the charter

is posted on the corporate governance section of the Company’s website.

In accordance with ASX Recommendations, the Nomination and Remuneration committee is currently structured so

that it consists of a majority of independent directors, an independent chairperson and at least 3 members. The

current members of the Remuneration and Nomination Committee are Mr Richard Newsted (Chairman), Mr Mark

Milazzo, Mr Ross Griffiths, and Mr Alastair McKeever. Further details of the members of the Remuneration and

Nomination Committee during the 2014 financial year are set out at in the Directors Report. Due to the Company

being in administration in the first half of 2014, the Remuneration and Nomination Committee did not meet in 2014.

4. Ethical Decision-Making

4.1 Code of Conduct

All directors and employees of the Group are expected to act with the utmost integrity and objectivity, striving at all

times to enhance the reputation and performance of the Company. The Company has adopted a Code of Conduct

and Ethics that sets out the standards of ethical behaviour required of the Board, senior executives and all

employees. The Code of Conduct and Ethics was revised and updated in August 2014, and is posted to the corporate

governance section of the Company’s website. The Company’s subsidiary in Brazil, Mirabela Mineração do Brasil

Ltda, has adopted a Code of Conduct that is closely aligned with that of the Company.

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The Company’s Code of Conduct requires that directors and employees:

act with honesty and integrity;

respect the law and act accordingly;

respect confidentiality and not misuse information;

value and maintain professionalism;

avoid conflicts of interest;

strive to be good corporate citizens; and

have respect for each other.

All directors and employees are responsible for maintaining the Code of Conduct and have a responsibility to report

breaches of the code to executive management or an appropriate Board member. Harassment in any form is not

acceptable in the Group and any actions that constitute harassment or a breach of the Code of Conduct are regarded

as serious misconduct and will be investigated by the Company.

The Company monitors adherence to the Code of Conduct and possible fraud activity through a whistleblower

hotline, employee training and regular feedback from management.

4.2 Whistleblower hotline

The Company established a whistleblower hotline in Brazil in 2012. On-going fraud awareness occurs by means of

continuous discussions with executive and management personnel and through the internal weekly news

publication in Brazil.

The hotline is managed by an independent consultant and is accessible to all employees and third parties by email,

telephone or mail. Hotline submissions are initially reviewed and filtered by the independent consultant who

forwards any alleged fraud complaints to a hotline steering committee. The hotline steering committee meets as

and when required to address all complaints that have been forwarded by the independent consultant. If

warranted, the fraud allegations are then forwarded to Ernst & Young forensics for investigation.

Several fraud allegations were received in 2014 through the hotline. None of the fraud allegations were confirmed.

4.3 Securities trading policy

The Company has established a Securities Trading Policy that imposes certain restrictions on directors, senior

management and other employees trading in the Company's securities. The policy has been adopted in compliance

with the ASX Listing Rules and to prevent trading in contravention of the insider trading provisions of the

Corporations Act 2001 (Cth), in particular, when Company personnel are in possession of price-sensitive information.

In general, trading in the Company’s securities is prohibited:

whilst in possession of unpublished price sensitive information that is not available to the market;

where Designated Persons (as that term is defined in the Securities Trading Policy) are engaging in the business

of “active trading” in the Company’s shares – that is, frequent and regular trading activity with a view to deriving

profit – related income from that activity;

two weeks before and 24 hours after the release of the Company's quarterly, half yearly or full year results to the

ASX; and

two weeks before lodgement and during the period that a disclosure document including a prospectus is open

for applications except to the extent that a Designated Person is applying for securities pursuant to that

disclosure document.

All Designated Persons are required to first seek approval from the Company Secretary, Chairman of the Board or an

appropriate member of the Board prior to trading in the Company’s securities. In accordance with the provisions of

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the Corporations Act 2001 (Cth) and the ASX Listing Rules, directors advise the ASX of any transaction conducted by

them in shares or options in the Company.

The Company’s Securities Trading Policy was reviewed and amended by the Board on 8 January 2015. A copy is

posted on the corporate governance section of the Company’s website.

4.4 Sustainability

The Group is committed to compliance with all relevant laws and regulations and continual assessment of its

operations to ensure protection of the environment, the community and the health and safety of its employees.

The Group has adopted appropriate procedures to ensure that all Group activities are carried out in compliance with

safety regulations, in a culture where the safety of personnel is paramount and which recognises environmental

sustainability and respect for cultural and heritage issues as essential requirements for all its activities. Procedures

are maintained to govern the activity of employees and contractors to ensure that the sustainability objectives are

met.

5. Diversity

The Company is committed to the development of a workplace environment that promotes diversity and recognises

the key competitive benefits of recruiting, developing and retaining a talented, diverse and motivated workforce in

the Group. The Company recognizes that diversity in its business helps create sustainable shareholder value,

provides a more dynamic and enjoyable work environment, and will often create new opportunities for the

Company.

The Company considers diversity to be about recognising, respecting and valuing differences based on, but not

limited to, gender, ethnicity, age, religion, disability, national origin and sexual orientation.

A review of the Company’s Diversity and Equal Opportunity Policy was undertaken in December 2014, with the

revised policy being approved by the Board on 8 January 2015. A copy of this policy can be found on the Company’s

website.

The Remuneration and Nomination Committee is responsible for overseeing the implementation of the strategies to

achieve the objectives of the Diversity Policy, including the development of measurable objectives for the

achievement of gender diversity, the assessment of the measurable objectives and progress against them annually.

Due to the Company being in administration in the first half of 2014 the previous Remuneration and Nomination

Committee did not meet in 2014 and some of the progress against objectives remained unchanged from 2013. The

current Remuneration and Nomination Committee is in the process of reviewing the diversity objectives and

preparing a new set of formal measurable diversity objectives for 2015.

Table 1 sets out the progress against the measurable diversity objectives for 2014.

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Table 1: Measurable diversity objectives for 2014

Measurable Objectives Progress Objectives

Development and assessment of measurable

objectives for the achievement of gender and

cultural diversity.

The measurable objectives are currently being

reviewed and amended by the Remuneration and

Nomination Committee.

Approach all Board appointments with no bias

towards gender or cultural diversity but with

selection criteria based on experience and merit to

enhance the skills of the Board. Priority to be given

to the appointment of a female director when the

next director is appointed, other than on the

normal rotation of directors.

All Board appointments that occurred during the

year were approached in accordance with the

objective, with the Company successfully

appointing its first female Board Member in June

2014.

Recruitment and selection is approached with

equality that ensures no bias towards gender or

cultural diversity with selection criteria based on

experience and merit.

Recruitment and selection that took place during

the year was approached in accordance with the

objective.

Promotions are based on equality with no bias

towards gender or cultural diversity to ensure the

best person for the role is selected.

All promotions made during the year were

approached in accordance with the objective.

Approach all training and career development

opportunities with equality to ensure no bias

towards any staff member(s).

All training and career development that took place

during the year was conducted in accordance with

the objective.

Offer flexible working arrangements for mothers

of young children, provided the arrangement is

acceptable to both the employee and the

Company.

The Company is working with employees to

support flexible working arrangements, with the

Company successfully providing women with young

children flexible working arrangements in the Perth

office during the 2014 year.

Promotion of equality in remuneration levels. Remuneration levels across the organization are

reviewed annually as part of the annual

remuneration review process. During this process

any inequalities are identified and addressed.

Table 2 demonstrates the Group Company’s gender diversity as at 31 December 2014. Reference to Senior

Executives includes all key management personnel of the Company.

Despite a reduction of the workforce in 2014, the number of women employed by the Group increased by 1% from

2013. The number of women on the Board increased by 20% and the number of women in Senior Executive

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Table 2: Group Gender Diversity

31 December 2014 %

Women on the Board 1 20

Women in Senior Executive Positions 2 20

Women employees in total 74 12

6. Disclosure

6.1 Continuous Disclosure and Communications Policy

The Company has adopted a Continuous Disclosure and Communications Policy which sets out management’s roles

and responsibilities and the processes to be followed in order to ensure compliance with ASX and the Corporations

Act continuous disclosure obligations. The policy sets out the roles and responsibilities of directors, officers and

employees of the Group to ensure that the Company maintains a level of disclosure that is of a high standard,

promotes compliance with the Company's disclosure obligations and provides investors with timely and equal access

to information.

A Disclosure Committee has been established which manages day-to-day compliance with the Company’s

continuous disclosure obligations. The Disclosure Committee is comprised of the Managing Director and Chief

Executive Officer, a non-executive director of the Board, the Chief Financial Officer, the Company Secretary and an

external legal advisor.

The Continuous Disclosure and Communications Policy was reviewed, amended and adopted by the Board in August

2014. A copy of the policy is posted to the corporate governance section of the Company’s website.

6.2 Communication with shareholders

Communications with, and accountability to, shareholders is a priority for the Company. The Company’s Continuous

Disclosure and Communications Policy outlines the Company’s commitment to continuous disclosure and

communications with its shareholders. The Board provides shareholders with information that may have a material

effect on the price of the Company’s securities, notifying the ASX of this information, posting the information on the

Company’s website, and issuing media releases.

Information is communicated to shareholders as follows:

the Annual Report is distributed to shareholders who request a copy, including relevant information about the

operations of the Company during the year, changes in the state of affairs and details of future developments.

Copies of the Annual Report are also placed on the Company’s website;

quarterly results are announced through teleconferences and transcripts of the teleconferences are placed on

the Company’s website;

providing quarterly investor conference calls;

all ASX announcements (including financial reports and quarterly reports) are posted to the Company's website

as soon as practicable following release; and

full texts of notices of meetings and associated explanatory material are placed on the Company’s website.

6.3 Website

All of the above information is made available on the Company’s website. Copies of all presentations made by the

Company in a public forum are posted on the website (unless legal restrictions prohibit the publication of the

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presentation on the website). Information is emailed to shareholders who lodge their email contact details with the

Company.

6.4 Meetings

The external auditors attend the Company’s annual general meeting to answer any questions concerning the

conduct of the audit, the preparation and content of the auditor's report, accounting policies adopted by the Group

and the independence of the auditor in relation to the conduct of the audit.

The Board encourages full participation of shareholders at its annual general meeting to ensure a high level of

accountability, identification with the Company’s strategy and goals and shareholder participation in decision

making. Shareholders are encouraged to ask questions of the Director’s, senior management and external auditors.

Important issues are presented to the shareholders as single resolutions.

The shareholders are, amongst others, responsible for voting on the appointment of directors, approval of the

maximum amount of directors' fees and the granting of options and shares to directors.

7. Risk Management

7.1 Risk management

Risk management is a function of the Audit and Risk Committee. The Audit and Risk Committee is responsible for

reviewing and approving processes for the identification, assessment, reporting and management of risks and

reviewing and approving procedures for the maintenance and monitoring of the Company's risk profile.

The Company has a Risk Management Policy and an Audit and Risk Committee Charter which are posted to the

corporate governance section of the Company’s website.

7.2 Internal control framework

The Board acknowledges that it is responsible for the Company’s overall internal control framework for risk

oversight and management of the Company's material business risks, and recognises that a cost effective internal

control system will not preclude all errors and irregularities. The Board retains responsibility for reviewing the

effectiveness of the Company's internal control framework for the management of business risks.

The Managing Director and the Chief Financial Officer are responsible for establishing, maintaining and reviewing

the Company’s risk management and internal control system. The Managing Director and Chief Financial Officer

must provide regular reports to the Board declaring that they have evaluated the effectiveness of the internal

controls and procedures, and that they have reasonable assurance that all material information is known for filing

purposes, the internal control of financial reporting is reliable for purposes of external reporting in accordance with

the relevant accounting standards, and that no changes in the controls have occurred that may materially affect

their effectiveness.

The Managing Director and the Chief Financial Officer have declared in writing to the Board, as required under

section 295A of the Corporations Act 2001 (Cth) that the financial reporting, risk management and associated

compliance and controls have been assessed and found to be operating efficiently and effectively in all material

respects. All risk assessments cover the whole financial period and the period up to the signing of the annual

financial report for all material operations in the Company.

7.3 Audit and compliance

Where considered appropriate, the Board may invite the Company's external auditors, professional advisors and

management to advise the Board on relevant issues to ensure compliance with all corporate financial and

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accounting standards. The Board considers audit matters prior to the half yearly and full year statutory reporting

cycles. The alternate quarterly results are reviewed by the Audit and Risk Committee and recommended to the

Board for approval.

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115

EXCHANGE LISTING

Mirabela Nickel Limited shares are listed on the Australian Securities Exchange (ASX). The Company’s ASX code is

MBN.

SUBSTANTIAL SHAREHOLDERS (HOLDING NOT LESS THAN 5%)

As at 19 March 2015

Name of Shareholder

Total number of voting shares in Mirabela Nickel Limited in which the substantial shareholder and

associates hold relevant interests

Percentage of

total number

of voting shares

HSBC Custody Nominees (Australia) Limited 302,748,498 32.56%

National Nominees Limited 112,893,520 12.14%

Hare & Co LLC 52,404,597 5.64%

JP Morgan Nominees Australia Limited 46,776,238 5.03%

CLASS OF SHARES AND VOTING RIGHTS

At 19 March 2015 there were 4,366 holders of 929,710,216 ordinary fully paid shares of the Company. The voting

rights attaching to the ordinary shares are in accordance with the Company’s constitution being that:

a) Each shareholder entitled to vote may vote in person or by proxy, attorney or representative;

b) On a show of hands, every person present who is a shareholder or a proxy, attorney or representative of a

shareholder has one vote; and

c) On a poll, every person present who is a shareholder or a proxy, attorney or representative of a shareholder

shall, in respect of each fully paid share held by them, or in respect of which they are appointed a proxy, attorney

or representative, have one vote for the share, but in respect of partly paid shares, shall have such number of

votes as bears the proportion which the paid amount (not credited) is of the total amounts paid and payable

(excluding amounts credited).

DISTRIBUTION OF SHAREHOLDERS

Range Holders Units Percentage

1-1000 2,675 497,810 0.05%

1,001-5,000 501 1,215,660 0.13%

5,001-10,000 237 1,824,154 0.20%

10,001-100,000 694 28,121,532 3.02%

100,001 and over 259 898,051,060 96.60%

Total 4,366 929,710,216 100.00%

The number of shareholders holding less than a marketable parcel is 3,052.

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116

UNLISTED OPTIONS

Securities

Number of securities

on issue

Number

of

holders Name of holders

Number

held

Nil - -

-

LISTING OF 20 LARGEST SHAREHOLDERS AS AT 19 MARCH 2015

Name of ordinary shareholder

Number of

shares held

Percentage of

shares held

1 HSBC Custody Nominees (Australia) Limited 302,748,498 32.56%

2 National Nominees Limited 112,893,520 12.14%

3 Hare & Co LLC 52,404,597 5.64%

3 JP Morgan Nominees Australia Limited 46,776,238 5.03%

5 Pioneer Funds Global High Yield 39,384,364 4.24%

6 Merrill Lynch Pierce Fenner & Smith 30,638,919 3.30%

7 Pioneer Global High Yield Fund 27,099,676 2.91%

8 National Nominees Limited <DB A/C> 26,747,934 2.88%

9 HSBC Custody Nominees (Australia) Limited <Euroclear Bank SA NV A/C>

21,047,253 2.26%

10 First Island Trust Company Ltd <The Rhino A/C> 20,046,800 2.15%

11 Sparinvest Pool 16,885,740 1.82%

12 Comsec Nominees Pty Ltd 9,567,881 1.03%

13 Powhattan & Co LLC 6,852,955 0.74%

14 Pioneer High Income Trust 6,776,723 0.73%

15 Pioneer Fund - US High Yield 6,591,297 0.71%

16 Ice 3 Global Credit Clo Ltd 6,536,765 0.70%

17 Citicorp Nominees Pty Limited 6,470,837 0.70%

18 JP Morgan Chase Bank NA 6,264,456 0.67%

19 First Island Trust Company Ltd <The Marlborough A/C> 6,101,200 0.66%

20 SEI Institutional Managed Trust 5,273,038 0.57%

757,108,691 81.44%

OTHER INFORMATION

There is no current on-market buyback of the Company’s securities and the Company does not have any securities

on issue that are subject to escrow restriction.

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For personal use only - ASX · Rotech Healthcare Inc. (Non-executive Chairman – September 2013 to...

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